EY Analysis: QuadrigaCX Creditors Await $160 Million, But the Exchange Only Has $21 Million in Assets
- QuadrigaCX owes creditors eight times the funds that they presently hold in assets.
- Three legal entities are associated with the bankruptcy claims, including Quadriga Fintech Solutions Corp., Whiteside Capital Corporation and 0984750 B.C. Ltd.
The case of QuadrigaCX has been plaguing the Canadian courts since the beginning of this year. For a quick recap, the CEO and founder passed away in December last year, preceding the quick collapse of the exchange. While his widow had tried to manage the funds for the month after his passing, the case was ultimately brought to the Nova Scotia courts, where the platform sought out creditor protection during the proceedings.
Now, the plot thickens. As if continual delays, extensions, and the departure of some members of their legal team were not enough, a new report from the court-appointed monitor has shed light on the exchange’s assets. Not only do the creditors have $160 million owed to them at this point, but the exchange does not have it. In fact, Quadriga is only holding $21 million in assets right now.
The report, created by the court-appointed monitor and trustee Ernst and Young (EY), was published in the last few days, and cited three legal entities that are tied in. Those entities affiliated with Quadriga include Quadriga Fintech Solutions Corp., Whiteside Capital Corporation and 0984750 B.C. Ltd., and each one has arisen as its own bankruptcy firm.
Each of the entities has a list of the assets and liabilities to pertain to them. For example, Quadriga Fintech Solutions previously had $254,180 CAD ($189,345 USD), and owed $214,873,113 CAD ($160,051,461 USD).
Whiteside Capital Corporation is in possession of no assets, as of April 12th. However, it owed $214,618,937 CAD ($159,875,011 USD). 0984750 B.C. had the most value in assets, adding up to $28,649,542 CAD ($21,343,192 USD), but owes over seven times that amount at $215,697,147 CAD ($160,688,982 USD).
George Kinsman, who is the EY employee involved in this case, explained that there is a “material discrepancy,” regarding the crypto obligations and the fiat currency reported. He added that one of the biggest struggles to find this information in the case came from the poor bookkeeping that the entities have maintained.
Still, these details do not address a more important question – where is the money? At the time that the case began, widow Jennifer Robertson issued an affidavit that said she was unable to access the cold wallets on the late CEOs laptop, claiming that all of the funds were located in it. However, EY has yet to find any crypto assets in the wallet addresses provided, apart from an accidental transfer of 103 BTC from a hot wallet.
Speaking to the efforts that Kinsman has made to find the missing funds, Kinsman wrote in the report that this examination will “take considerable time and effort to pursue.” However, he believes that the work performed without much information available may render these efforts impossible and costly. He further adds that the exchanges involved with the cash have primarily been uncooperative.
Presently, EY is holding onto the $500,000 in crypto assets that came from the hot wallets of Quadriga, along with “various other sources.” EY has 61 bitcoin, 33 bitcoin cash, 2,661 bitcoin gold, 851 Litecoin and 960 ether, but the report is vague about the whereabouts of the rest of the missing cryptocurrency.
Along with the 76,319 users that have come forward as creditors, Robertson is on the list as a secured creditor, and she is entitled to collect $300,000 CAD ($223,500 USD), due to the costs of the civil rehabilitation process. However, based on all of the other information that has come out so far, Kinsman sees this claim being challenged soon.
The estate of Cotten and Robertson plays a role as well, as it appears that the funds from the exchange may have been used in the purchase of multiple personal goods. To prevent assets from being liquidated, EY coordinated with Robertson’s attorneys to issue an asset preservation order. While the order is in effect, Kinsman explained that there is a $1 valuation, which is more of a placeholder figure while seeking out other assets of Quadriga.
At this point, the assets within the estate have not gone through appraisal, but Kinsman has been advised that the “preserving parties” estimate a value of $12 million CAD (about $9 million USD). However, since this number is substantially lower than the payouts that QuadrigaCX needs to make, the platform will need to figure out a way to settle up on their debts.