Embattled QuadrigaCX exchange to begin ‘interim distribution of funds’

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Digital currency exchange QuadrigaCX is set to start interim distribution of funds to creditors in the coming weeks after nearly three years of bankruptcy proceedings.

Court-appointed bankruptcy trustee Ernst & Young announced its decision after consultation with estate inspectors, with details of the interim distribution to be released at a later date. Miller Thomson, the legal representative for creditors, disclosed ahead of the interim distribution some creditors could see a rejection or reduction in their claims.

According to a notice posted on its website, Miller Thomson confirmed that the rejection or reduction would come as a Notice of Disallowance of Claim. The law firm stated that the notice would be issued on claims that Ernst & Young believed to be “invalid, incorrect, or unsubstantiated.”

Such notice will most likely be issued in the event of a discrepancy of figures in QuadrigaCX’s database and a creditor’s proof of claim. Recipients of such notices reserve the right to appeal the decision by submitting certain documents to the court, including the original proof of claim, reasons for disagreeing with the notice of appeal, and other supporting documents.

“The first step is to review the reasons for the revision or disallowance and gather any necessary evidence to support their claim,” Miller Thomson said. “In this case, the Trustee is most likely to have issued a Notice of Disallowance if there was a discrepancy in your proof of claim.”

Since QuadrigaCX declared bankruptcy in 2019, creditors have been jostling to receive payment for their deposits on the exchange. Court documents reveal that the exchange owed its users nearly $160 million, compounded by an $86 million trading loss.

Once the largest digital currency exchange in Canada, the QuadrigaCX ran into a series of unfortunate events. The private keys to the exchange’s cold storage systems are nowhere to be found since the platform’s founder Gerald Cotten passed away in India.

Only a fraction recovered

After several months of scouring assets, Ernst & Young announced that it could only receive $34.3 million worth of assets. The recovered sum is only a fraction of the $160 million owed to creditors, a claim supported by the Ontario Securities Commission (OSC).

“We did not identify any other assets beyond those identified by Ernst & Young,” said the OSC.

Following the implosions of 2022, several digital currency firms have been embroiled in bankruptcy proceedings worldwide after facing bouts of liquidity crises. Several affected firms have applied for moratoriums against legal action from creditors as they make a valiant attempt to repay creditors.

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