Business

Derek Tonin

‘No law applied’: QuadrigaCX’s former lawyer speaks out

For those desperate to know more about what exactly happened with embattled crypto exchange QuadrigaCX, a voice from its past brings a wealth of new information today. Christine Duhaime of Duhaime Law, the firm previously representing the exchange, has written a fascinating history of the early days at CoinDesk, and given some input on how she thinks things are going with the current court battle.

Duhaime worked for QuadrigaCX in 2015, helping company firm for six months. She describes those early days of the exchange as clean cut and as responsible as possible. She describes their compliance:

“It was registered with FINTRAC, Canada’s FinCEN, and subject to compliance examinations, which are akin to the examinations the IRS conducts on U.S. exchanges with MSB registration; it was a reporting issuer in two Canadian provinces and subject to the oversight of two securities regulators, which is akin to being subject to two SECs supervising its activities; and it was registering in the province of Quebec for anti-money-laundering purposes with that province’s securities regulator.”

They also might have been the first crypto company in the world to secure cold storage insurance. She knew that as of 2016, that insurance would have still had been intact, and wonders if it might still be there today.

In her six months working with the company, Duhaime felt the company was on the right track, but might have been lacking the experience necessary to pull off their goals. She wrote, “I can say that QuadrigaCX was run by tech geeks, who were competitive, ambitious and smart but who were unfamiliar with the capital markets ecosystem in Vancouver.”

Then one day, Duhaime explains that Cotten no longer wanted a publicly-listed company, and made a decision to terminate the “law and order” side of the company. From there, she describes an exchange that was operated “as if it had no investors, no shareholders, no regulatory agencies and no law that applied to it.”

Now she only has questions to help the creditors, of which her law firm is one. Were the cold wallets still insured? Why is the court and QuadrigaCX’s current lawyer not reaching out to those with more knowledge of the company?

Duhaime Law hasn’t commented until now because they are afraid to bring more pressure on those with knowledge. One unscrupulous party demanded confidential information from the firm, and threatened to smear them on social media if they wouldn’t comply. They are afraid the same could happen to others with knowledge of the case, but had to comment now that so much information still hasn’t turned up.

A big question that comes from this piece is how Canada could have let a situation like this deteriorate so badly. QuadrigaCX was on the right path, trying to do everything right. Then by the whims of one man, they went down the wrong path, and unluckily for their customers, had some of the worst luck possible, resulting in millions lost. Better regulation is clearly necessary, Duhaime concludes.

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