A Novia Scotia court granted creditor protection to Canadian cryptocurrency exchange QuadrigaCX. The crypto exchange filed for bankruptcy protection in the Nova Scotia Supreme Court amid financial and legal troubles following the unexpected death of its founder and CEO Gerald Cotton.
QuadrigaCX’s nearly 115,000 customers reportedly lost around $145 million as the funds were placed in a cold wallet for safety, and Cotton was the only person who knew the password.
“Today an order for creditor protection in accordance with the Companies’ Creditors Arrangement Act (CCAA) was issued to allow us the opportunity to resolve outstanding financial issues that have affected our ability to serve our customers,” the firm said in a message to its customers Tuesday.
Creditor protection is in place for 30 days, with the option to extend. However, the company said its focus is to determining a plan for how to deal with its customer obligations within that time frame.
The company said its efforts to address liquidity issues, including locating cryptocurrency reserves held in cold wallets required to satisfy customers’ cryptocurrency balances on deposit, and sourcing a financial institution to accept the bank drafts being transferred, have failed.
The Court has appointed Ernst & Young Inc. to oversee the proceedings as QuadrigaCX makes efforts to address its customer obligations.
As per an affidavit filed by QuadrigaCX on January 31, there are 26,500 bitcoins, 11,00 bitcoin cash, 11,000 bitcoin cash SV, 35,000 bitcoin gold, 200,000 litecoin and 430,000 ether stored on Cotton’s encrypted and inaccessible laptop.
Securing digital coins in cold wallets, which are offline and encrypted, are a common practice by crypto exchanges. This protects the coins from hacking and virtual theft as it can only be accessed by those who know the password. But, its highly risky too as the entire value of the cold wallet rests on those persons.
Meanwhile, Coindesk reported that Gerald Cotton died in a hospital in the north Indian city of Jaipur on December 9, quoting an Indian government-issued death certificate.