In a new report, Ernst and Young (EY), the court-appointed monitor of QuadrigaCX, has recommended proceeding with the bankruptcy process for the troubled exchange.
EY is currently following the restructuring process of the Canadian exchange under the Companies’ Creditors Arrangement Act (CCAA). The firm was appointed to the task by a Canadian court and was ordered to recover the missing $190 million worth cryptocurrency that went missing following the untimely death of the exchange’s CEO Gerald Cotten.
The report published on Tuesday outlined that the victimized creditors’ of QuadrigaCX “will benefit” from a transition from the ongoing restructuring process to a bankruptcy filing under the Bankruptcy and Insolvency Act (BIA).
“Transitioning from the CCAA to the BIA will streamline the administration of the proceedings, reduce the level of professional involvement and provide enhanced investigative powers for the Trustee,” EY stated on the report.
“As set out in previous reports of the Monitor, the current objective of these CCAA proceedings is data and asset recovery. Given the present circumstances, the possibility that Quadriga will restructure and emerge from CCAA protection appears remote.”
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A Cost-Effective Process
The audit firm argued that moving towards bankruptcy at this stage has a number of benefits as this will allow the exchange to liquidate its valuable assets. Moreover, it will also reduce governance issues by removing the need of a chief restructuring officer or even the directors, and providing the trustees “additional investigatory powers” without the need of a court order.
A bankruptcy filing will also be cost effective as it will reduce legal expenses incurred each time while updating the court about the recovery process.
This is the fourth report filed by the court-appointed monitor since January and, as mentioned in the recent one, the audit company is planning to file a final one in the next few weeks.
The Tracked Funds
An earlier report revealed that the troubled crypto exchange had transferred all its known crypto holdings – 51.1 Bitcoin, 33.3 Bitcoin Cash, 2,032.7 Bitcoin Gold, 822.3 Litecoin, and 951.5 Ether – to the consultancy firm. However, it also surfaced that QuadrigaCX accidentally transferred nearly $500,000 in Bitcoin (BTC) to its cold wallets.
In Tuesday’s report, EY detailed that it has tracked a number of third parties holding the exchange’s funds and might need court orders to recover them. Moreover, the restructuring monitor pointed out that Black Banx, formerly known as WebBank 21, is holding around CAD 9 million (around $6.7 million) of Quadriga’s money and has not responded to EY’s request.
Last month, the crypto exchange gained a 45-day extension from the court which bought it some time to recover the funds without worrying about litigation from creditors. However, two Canadian law firms – Miller Thomson and Cox & Palmer – appointed a committee to provide guidance to the exchange’s victims, Finance Magnates reported earlier.