The cryptocurrency exchange says it’s unable to access millions of dollars of users’ money after the death of its chief executive officer, who reportedly was the only person with digital codes to the system. Tech experts doubt those claims, but the exchange is temporarily protected against any potential lawsuits.
A number of Canadian law firms have come forward seeking to represent affected users of the Quadriga cryptocurrency trading platform, which locked more than 100,000 users out of almost $200 million in assets after the exchange’s CEO suddenly died in India last year, according to a Bloomberg report. Gerald Cotten, the CEO, is said to have been the only person with the codes that can unlock the system.
The law firm representatives will congregate on 14 February in a courtroom in Halifax before Nova Scotia Supreme Court Justice Michael Wood, who may then appoint counsel to represent affected account holders. Firms including Bennett Jones LLP; McInnes Cooper; Osler, Hoskin & Harcourt; and Cox & Palmer are competing for the right to represent the affected users because such an opportunity would give them a slice of the administrative charges from the process to cover their professional fees, Bloomberg writes.There are approximately 115,000 customers who have lost a total of $196 million in cryptocurrency and cash following the death of Cotten, the report reads. Quadriga was granted creditor protection by the Nova Scotia Supreme Court last week, which temporarily blocks all lawsuits against the company while it seeks to restructure with the help of Ernst & Young.
It appears that certain law firms have an advantage in the upcoming process. For example, Osler, Hoskin & Harcourt reportedly represent a man named Richard Kagerer. Kagerer, a software consultant from British Columbia, already has experience fighting with crypto exchanges: in 2014, Japan’s Mt. Gox exchange entered insolvency proceedings, and his firm was one of Mt. Gox’s creditors. Kagerer also said that he was “among a small number of customers” who filed claims in court when another unnamed Canadian cryptocurrency exchange shut down a few years ago.
Besides, Osler has the support of one Giuseppe Burtini, a representative of a blockchain company that reportedly had “a significant multi-million dollar fiat (CAD) currency balance with Quadriga.” The company has been demanding Quadriga pay its balance for a year, Burtini said.
In the meantime, the British Columbia Securities Commission said it has no jurisdiction over Quadriga.
The agency “does not currently have any indication that Quadriga CX, the crypto asset trading platform, was trading in securities or derivatives or operated as a marketplace or exchange under British Columbia securities laws,” the regulator’s spokesman said in a statement. “As such, BCSC does not regulate it.”
Some experts believe that Quadriga’s alleged inability to access the users’ assets does not add up.
“The Quadriga story doesn’t make sense,” Emin Gün Sirer, a professor at Cornell University and co-director of the Initiative for CryptoCurrencies and Contracts, told Bloomberg. “The one amazing thing about blockchains is that anyone can audit, in essence, any company.”
Max Galka, the founder of analysis firm Elementus, even speculated that “there’s some fishy business going on” in the exchange, according to an earlier Bloomberg report.
“Not to be transparent” about where the money is exactly on a blockchain “is unusual,” said Christine Duhaime, a Canadian lawyer who specializes in fighting money laundering.
Gerald Cotten, the Quadriga CEO, has reportedly filed a will less than two weeks before his death saying all his assets should be moved to his wife, according to anotherBloomberg report, which led to some speculating that his death could have been deliberately faked. Cotten was 30 at the time of his supposed death.