Quadriga’s 7th report of the trustee—choosing a currency conversion date

EY, the court-appointed trustee in the bankruptcy case of failed Canadian crypto exchange QuadrigaCX filed its 7th report of the trustee with the Ontario Superior Court today.

Most of this is administrative and accounting stuff with regard to how EY plans to settle claims, but I’ll summarize for you.

Claims for lost QuadrigaCX money were due on Aug. 31, 2019. Most of the claims came in before that date, but there’s been a small trickle afterward. EY has thus far received 17,053 claims for missing Quadriga funds.

(Recall that earlier, EY said Quadriga had roughly 76,000 active users when the exchange shuttered in early 2019. Presumably, some folks were shy about filing claims and revealing their true identities—or else they had such small amounts on the exchange that it wasn’t worth the fuss.)

All the claims rank pari-passu, meaning they will all get treated the same. None will receive priority over any others, although 25 percent who filed claimed a “right of priority” under the Bankruptcy and Insolvency Act.

Here’s EY’s breakdown of the claims by asset:

Image: EY’s 7th report of the trustee

Picking a currency conversion date

Affected Quadriga users have submitted claims for missing crypto, Canadian dollars, and U.S. dollars. EY now needs to convert all of the U.S. dollar and crypto claims into Canadian dollars, so it can distribute available funds in the same base currency.*

The question is — what exchange rates do they use, based on what day?

The trustee has the choice of using one of two dates. It could use Feb. 5, 2019, the date Quadriga froze all withdrawals and deposits, which is the same day the exchange filed for creditor protection. (Yes, as unbelievable as it sounds, Quadriga was accepting funds up until that very day, even though its CEO Gerald Cotten died in December.)

Or it could use April 15, 2019, the day that Quadriga officially transitioned into bankruptcy. The price of crypto went up substantially in those two months, so EY is asking the court to establish the exchange rates.

Total claims will be either CA$224 million (US$171 million) or CA$291 (US$223 million), depending on the conversion date used.

Image: EY’s 7th report of the trustee

Accepting claims with errors

Of the 17,053 claim forms it received, EY found that 5,500 contained errors. Most of these were minor errors, such as missing signatures, missing pages, etc. Rather than calling and tracking down the claimants individually to fix the errors — which costs money — EY is requesting a court order that will allow them to accept the claims as is.

EY said it believes this is the “most cost effective way to address the issue” and will maximize the amount the affected users will ultimately recover.

What’s left in the till?

Another big question is, how much money will go to the claimants?

From the period April 15, 2019, to Oct. 30, 2020, EY has rounded up nearly CA$45 million (US$34 million) in missing Quadriga funds — that includes money from liquidating properties held by Cotten’s widow, Jennifer Robertson.

In the same period, EY has paid out CA$5.7 million (US$4.4 million) — that includes a whopping CA$1.9 million for trustee fees and CA$1.4 million in legal fees. That leaves a total of roughly CA$39 million (US$30 million) available for distribution.

Miller Thomson, the legal firm representing Quadriga’s former users, said in September, that two things need to happen before any claims can be filled. First, EY has to review each claim individually. Second, the Canada Revenue Agency needs to complete its audit of Quadriga’s tax liabilities.

*Updated to clarify that the conversion rates for USD and crypto will be applied to the claim amounts, not the amount that EY has recovered.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s