QuadrigaCX: Exchange may go into bankruptcy

02 Apr, 2019 | Updated: 02 Apr, 2019
by David Robb
QuadrigaCX: Exchange may go into bankruptcy

As the QuadrigaCX case continues at the Supreme Court of Nova Scotia, an audit firm involved with the case has suggested an alternative course of action. Ernst & Young suggested that the company could enter bankruptcy proceedings. 

EY is currently operating as the Monitor in this case, and it has just filed its fouth report. In it, it is suggested that bankruptcy may be preferable to the current process of restructuring the firm under the Companies Creditors Arrangement Act (CCAA). Two of the directors have made requests to no longer be involved with the restructuring, and the bankruptcy option would allow EY to have a more direct role in the process.

EY suggests as an option that proceedings could transition "to bankruptcy proceedings under the BIA (Bankruptcy and Insolvency Act), following an order of the Court lifting the stay of proceedings...In this scenario, the Monitor would transition to the role of trustee-in-bankruptcy (the "Trustee") of each of the Applicants and the roles of the directors of the Applicants would end. The role of the CRO would also end with the termination of the CCAA proceedings".

Read more: QuadrigaCX: creditors committee includes former Mt. Gox userThe QuadrigaCX timeline: as it happened

According to the report, there would be several advantages of a bankruptcy proceeding. It would "allow for the potential sale of assets, including but not limited
to Quadriga’s operating platform...Governance issues would be addressed through the appointment of the Trustee for each of the Applicants thereby eliminating the need for the CRO or directors...Representative Counsel and the Official Committee could continue to participate in a bankruptcy process along with inspectors...and...The Trustee will have additional investigatory powers without further relief from the Court that will be of assistance in the ongoing investigation of the business...including the right to compel production of documents and seek examination of relevant parties under oath".

Read more: 4 cryptocurrency exchanges closed in 2019: what happened?

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