Quadriga’s trustee hires blockchain analytics firm

The search for what happened to QuadrigaCX’s missing money is a never-ending one. 

In the latest twist, Ernst & Young, the trustee in the Canadian crypto exchange’s bankruptcy case, hired an analytics firm to probe the blockchain for additional clues on where it all went. 

Miller Thomson, the law firm representing Quadriga’s former users, sent out a letter to Quadriga creditors on Friday, letting them know that on August 17, EY retained Kroll Associates “to conduct further analysis on a subset of transaction data.” 

The decision was guided in part by the “official committee,” a subset of Quadriga users who represent the exchange’s former users as a whole. The group has been working with EY since February collecting and reviewing proposals from third-party cryptocurrency­ asset tracing firms, Miller Thomson said.

Kroll, a division of New York-based financial consultancy firm Duff & Phelps, will not be tackling the project alone, however. It is joining forces with Coinfirm, a London-based blockchain analytics firm.

Kroll will receive up to $50,000 USD for their efforts. And EY has provided a contractual indemnity of up to $150,000 USD—three times the professional fees—to protect Kroll from any lawsuits or negligence claims. 

Crypto Capital

In its letter, Miller Thomson also noted that it appears Crypto Capital is not holding any of Quadriga’s money. 

Recall that back in January, Miller Thomson reached out to creditors asking for help in identifying if Quadriga had used the Panamanian third-party processor to funnel cash in and out of the exchange.

Crypto Capital is of interest because it is tied to crypto exchange Bitfinex, which is allegedly missing some $850 million. (I guess the hope was that some additional Quadriga money might have been tied up in all of that mess—and there would be more to reclaim.)

Disbursement of funds

So far, EY has located $35 million (CA$46 million ) to pay out to creditors. The amount represents a fraction of the total $190 million (CA$246 million) that went missing when the exchange went belly up early last year. 

As of May, EY has received 16,959 claims from the 76,000 or so users who held funds on the exchange when it collapsed.

Two things have to happen before those claims can be filled. The first is that EY has to review each claim individually, and that takes time and money.

But the bigger holdup by far is that the Canada Revenue Agency needs to complete its audit of Quadriga’s tax liabilities, said Miller Thomson.  

In March, the CRA collected a vast trove of documents from EY, and there’s no telling how long that will take to dig through, especially given current circumstances.  

“The CRA did not confirm a timeline of when the CRA Audit will be completed given the COVID­19 pandemic,” the law firm said.

 

Documents point to QuadrigaCX using payment processor Crypto Capital

Last month, Miller Thomson, the law firm representing Quadriga’s former users, asked creditors for help in identifying if the failed Canadian exchange had used Crypto Capital Corp, a payment processor that is allegedly missing some $850 million

In a letter posted on its website on Jan. 22, the law firm said that it had received information that Quadriga had used a “Panamanian shadow bank” in the final quarter of its operation—presumably, that means September thru December 2018, since the exchange went belly up in January 2019.

Specifically, the law firm asked creditors to forward any emails or financial statements with names of people or companies linked to Crypto Capital. It offered a lengthy list that included Global Trading Solutions LLC and Global Trade Solutions AG.

The former was a shell company in Chandler, Ariz., set up on Feb. 14, 2018, by Reggie Fowler, one of the individuals alleged to have connections to Crypto Capital. The latter was the Swiss parent company of Crypto Capital. (The firm was cited as a parent company on Crypto Capital’s website.)

Screen Shot 2020-02-13 at 8.14.16 AM

Also, in a December 2018 letter published on this blog, Crypto Capital boss Ivan Molina wrote that “Global Trade Solutions AG and related entities” were being denied banking in the U.S., Europe and elsewhere as a result of financial crimes investigations. Molina was arrested for money laundering last year.

What about GTS Germany?

Global Trade Solutions Gmbh is not on Miller Thomson’s list. I can’t find it on any legal or court docs either, but someone posted on Reddit a year ago that they had received their Crypto Capital withdrawals from the company. 

The sole officer for Global Trade Solutions Gmbh is Ralf Hülsmann, who started on June 15, 2016. Researcher Robert-Jan den Haan found the German public registry for the company, and it is clearly associated with Spiral Global Trade Solutions AG, which is directly linked to Fowler.

Spiral Inc. is a holding company Fowler set up in 1989. At one time it held more than 100 businesses. He also owns Spiral Volleyball.

Screen Shot 2020-02-12 at 11.15.44 PM

Links to Quadriga

Two documents recently shared by individuals on Telegram claiming to be Quadriga creditors show funds sent to Global Trade Solutions Gmbh

On June 28, 2018, one creditor wired $50,000 CAD from the Royal Bank of Canada in Toronto to an account at Deutsche Bank in Germany belonging to Global Trade Solutions Gmbh.

“I should have followed my gut feelings when I was at the bank making this wire transfer,” the user told me. “I just had a very shady feeling.”

Screen Shot 2020-02-11 at 6.54.47 PM

Another creditor shared the following document on Telegram. Similarly, it shows funds being sent to a Global Trade Solutions Gmbh account at Deutsche Bank. The transfer appears to be going out from a bank in Toronto, but there is no date on it.

Screen Shot 2020-02-11 at 8.01.17 PM

Other evidence

There is other evidence to support Quadriga using Crypto Capital. At one time, the payment processor listed Quadriga on its website as a client. Gerald Cotten, the exchange’s now-deceased founder also admitted to using it in the past.

In an email to Bloomberg News on May 17, 2018, he wrote: “Crypto Capital is one such company that we have/do use. In general it works well, though there are occasionally hiccups.”

Assuming Quadriga did use Crypto Capital, the only question that remains is, was the payment processor holding any Quadriga funds when the exchange went belly up? (Remember, Quadriga didn’t keep any books, so it’s up to Miller Thomson and court-appointed trustee Ernst & Young to piece things together.) And if so, is there any chance in hell of getting those funds back?

(Read my complete Quadriga timeline to dig in deeper.)


Updated on Feb. 19 to add Ralf Hülsmann and link to someone on Reddit who said they received CCC withdrawals via Global Trade Solutions Gmbh. 

Updated on Feb. 13 to fix typo — Global Trade Solutions AG, not Global Trading Solutions AG — add a screenshot from Crypto Capital’s website and mention missing $850 million.