QuadrigaCX, the cryptocurrency exchange that lost access to its wallets after its founder’s death, has formally entered bankruptcy proceedings.

An end may now be in sight in regards to the painful story of QuadrigaCX. Once a major cryptocurrency exchange in Canada, the platform crashed after its founder, Gerald Cotten, died in India last December due to complications from Crohn’s disease. After months of legal wrangling, the exchange has now officially entered bankruptcy proceedings.

The Sad Saga of QuadrigaCX

To be honest, the story of QuadrigaCX is unique in the cryptocurrency world. The death of Cotten was a tragic happening, especially in light of his youth (30 years old) and being married. However, the fallout from his death was massive.

It turned out that Cotten ran the entire exchange from his laptop, which was encrypted. In addition, he was the sole person who had the keys necessary to gain access to the exchange’s wallets as they were stored on his laptop.

Cotten’s death meant that 115,000 users of the platform found themselves unable to get to their stored cryptocurrency. All told, $195 million of Bitcoin and Ethereum were locked away forever.

QuadrigaCX then filed for protection from class action lawsuits, which was granted by the court. Experts were hired to try to bypass the encryption on Cotten’s laptop, to no avail. Eventually, the court appointed a monitor, Ernst and Young, to oversee matters. Last week, they filed a report where they recommended the exchange enter bankruptcy, which is now happening.

Few Details so Far

In its report last week, Ernst and Young noted that Cotten had mixed his personal and corporate finances. They also said that funds belonging to QuadrigaCX may have been used to buy assets “held outside the corporate entity.” However, there were no further details given in the report.

Due to their findings, Ernst and Young asked the court to issue an asset preservation order, which was granted. This order put a hold on all assets belonging to the exchange, Cotten’s estate, and those of Cotten’s widow, Jennifer Robertson. She can cover living and legal expenses by drawing upon two business accounts, but these transactions are being monitored by Ernst and Young.

The bankruptcy move gives Ernst and Young greater authority in digging deeper into the situation. They now have the ability to compel witness testimony and documents due to their greater legal standing.

The bankruptcy proceedings have already had some effect. The court-appointed monitor has started proceedings to get $52 million that is tied up with third-party payment processors. Some of those processors are complaining that they have been given little notice to turn over the money and that Ernst and Young are overreaching their authority. Nova Scotia Supreme Court Justice Michael Wood has given the payment processors and Ernst and Young until April 18, the date of the next hearing, to iron out their differences.

While getting $52 million is a far cry from $195 million, at least it is something. It’s still amazing that a major exchange could operate without having a backup plan in place in case something went catastrophically wrong. It also goes without saying that relying upon a single laptop to run an exchange is also baffling. Overall, this is one weird and twisted case.

Images courtesy of CBC, Hacker Noon, and Pixabay.