Canadian cryptocurrency exchange QuadrigaCX has filed for creditor protection, according to a message from the exchange's board of directors. Filed with the Nova Scotia Supreme Court, the exchange is asking that the advisory service Ernst & Young Inc. be appointed as a monitor while it "address[es] the significant issues that have affected our ability to serve our customers."
The creditor protection application was filed in accordance with Canada's Companies' Creditors Arrangement Act (CCAA). The CCAA allows a company to "restructure its financial affairs" and avoid declaring bankruptcy while allowing "creditors to receive some form of payment for amounts owing to them by the company."
On January 14, the company announced the passing of its founder and CEO, Gerry Cotten. As upsetting as his death may have been, an affidavit filed by his widow, Jennifer Robertson, revealed a major complication for the exchange. Apparently, Cotten had "sole responsibility" for handling the exchange's funds and coins, as well as dealing with the banking and accounting side of the business. All of this includes an "excess of $180 million of coins in cold storage." The problem is, "The laptop computer from which Gerry carries out the Companies' business is encrypted and [Robertson does] not know the password or recovery key."
According to the document, attempts have been made to hack into Cotten's computer, but no access has been gained. Regarding the coins in cold storage, the exchange's message to customers states:
"For the past weeks, we have worked extensively to address our liquidity issues, which include attempting to locate and secure our very significant cryptocurrency reserves held in cold wallets, and that are required to satisfy customer cryptocurrency balances on deposit … these efforts have not been successful."
Along with having no access to possibly more than $180 million in coins, earlier this week users experienced issues with the exchange after a message on the site claimed an upgrade was being performed. Later, another message appeared, this one stating the site was down for maintenance purposes. According to some users, while the site was down, withdrawals were stuck in a "pending" state.
As of now, a preliminary hearing with the Nova Scotia Supreme Court is set to be held on Tuesday, February 5, regarding QuadrigaCX's creditor protection application and the appointment of Ernst & Young.