QuadrigaCX creditors now have a legal team to represent them in the crypto exchange’s Companies’ Creditors Arrangement Act (CCAA) proceedings.
Nova Scotia Supreme Court Judge Michael Wood appointed law firms Miller Thomson and Cox & Palmer to represent the more than 115,000 Quadriga creditors, who are owed a total of $250 million CAD. Most of that money— $180.5 million CAD—is stuck in cold wallets after the company’s CEO died in India. He was the only one who held the keys.
To offer some background, a CCAA is a federal law in Canada that gives insolvent companies, such as Quadriga, time to restructure themselves and come up with a so-called plan of arrangement. It is not quite like a bankruptcy. A company can still operate and pay its employees during the proceedings.
When Quadriga was granted creditor protection on February 5, the judge issued a 30-day stay, to keep any lawsuits at bay. The court also appointed Ernst & Young as a monitor to oversee Quadriga’s business and help Quadriga put together its plan of arrangement.
If that plan is accepted by the court and the creditors, Quadriga users will likely be able to recoup some of their losses more expediently. If the plan is rejected, the stay will be lifted, and creditors can forge ahead with their lawsuits.
In the case of Quadriga, because there are so many creditors, the court felt it appropriate to find them legal representation. Three teams of lawyer vied for that position on February 12. Justice Wood reviewed their credentials and made his final decision today.
In his ruling, he explained that he chose Miller Thompson/Cox & Palmer because both firms have extensive insolvency experience. In the coming weeks, Cox and Palmer, which has an office in Halifax, will take the lead on the civil procedure and court appearances, while Miller Thompson, which is headquartered in Toronto, will handle “project management, communication and cryptocurrencies.”
The judge noted in his ruling that the firms’ proposal was “thought out carefully with a view to minimizing costs.” The team proposed an initial $250,000 cap on fees. They also said that they would communicate with creditors via social media, and that they would advocate for user privacy, something Quadriga users indicated was important to them.
Appointing a representative counsel and a stakeholder representative committee in complex CCAA proceedings is not unusual, the judge said. Such measures are usually undertaken when the group of stakeholders is large and without representation, many of them would struggle to effectively participate in the CCAA proceedings.
He also agreed with Quadriga’s lawyer Maurice Chiasson and others that assembling a committee of users to represent the broader group of creditors was something that needed to happen quickly.
“The anecdotal evidence at the hearing is that many people are extremely upset, angry and concerned about dishonest and fraudulent activity,” he wrote. “There are reports of death threats being made to people associated with the applicants. All parties agree that this user group needs representation as soon as possible.”
Quadriga’s stay of proceedings expires on March 7. A hearing is planned for March 5 to update the court on what progress Quadriga and its monitor Ernst & Young have made.
Update: According to an email Ernst & Young sent to creditors, Quadriga will, in fact, seek to extend the stay of proceedings. The monitor writes that “the stay of proceedings may be extended for any period that the Court deems appropriate. There is no standard timeframe for the completion of proceedings under the CCAA.”