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The widow of the founder of Canada’s largest cryptocurrency exchange appears to be trying to protect the value of her four Nova Scotia properties from future creditors.

Gerald Cotten, QuadrigaCX’s founder, chief executive and sole director died suddenly while in India at the age of 30 in December. In affidavits filed with the courts, Jennifer Kathleen Margaret Robertson, claimed she does not have access to $180 million in digital assets within Quadriga’s “cold” wallets stored on her late husband’s laptop.

QuadrigaCX was granted protection from its creditors Tuesday in Nova Scotia Supreme Court in order for lawyers to get a “sense of stability” in the case amidst numerous threats of legal action from Canadians who have currency tied up in the company.

According to documents obtained by The Chronicle Herald, since Gerald Cotten’s death on December 9, Robertson took out collateral mortgages on four Nova Scotia properties the couple owned and were left to Robertson in a will Cotten signed off on just days before his death.

These documents show that within a few days at the end of January, Robertson took her deceased husband’s name from the ownership of the four properties, worth a combined $1.1 million, then took out collateral mortgages on all four in favour of a trust of which she is a trustee, and finally transferred ownership of at least two of those properties to that trust.

The Chronicle Herald could not find any publicly available information on The Seaglass Trust, the entity named in the documents.

The properties were all purchased by Cotten and Robertson between 2016 and 2018 and include a large house at 71 Kinross Court in Fall River — which is listed as Robertson’s primary address, as well as several swatches of land: one in Fall River and and two in Lunenburg County. As of Tuesday afternoon the Kinross Court house had a “sold” sign posted out front from Royal LePage Atlantic, which confirmed the recent sale of the house.

The two Fall River properties were transferred from Robertson’s ownership to the ownership of Jennifer K. M. Robertson (trustees) on Jan. 30. As of Thursday evening, Nova Scotia’s Property Online site listed the two Lunenburg properties as pending parcel registry changes.

Daren Baxter, a partner at McInnes Cooper in Halifax who focuses on trust and estate planning, wouldn’t speculate or comment on Robertson’s motivations but said taking out a mortgage in favour of a trust is a technique sometimes used to protect those assets from future creditors.

Essentially, owing the trust the equity in the property — either through taking loans from the trust or signing a promissory document — legally encumbers those properties and gives the trust the first crack at grabbing the value tied up in them if there is a future judgment against the owner.

Baxter said this would only work for future creditors; existing creditors cannot legally be defeated in this way. Moreover, the trust would have to have multiple individuals listed as beneficiaries. Otherwise there are legal avenues creditors can take to gain access to those assets.

“(If there is more than one beneficiary) and the creditors try and take what’s in the trust, the defence of that would be ‘Well wait a second there's no guarantee (that individual) is going to get this,’ ” Baxter explained.

As to why Robertson would then go and transfer the title for those properties out of her name and into the trust, Baxter said he couldn’t speculate.

Baxter said said transferring the properties to the trust essentially makes the collateral mortgages null and void. He said it looks like the collateral mortgages could have just been one of the legal steps taken in the process of distancing the owner from the the properties.

“You might be setting yourself up for a fight with creditors in the future but if I was the client I’d much rather have all this structure set up so I don’t automatically lose the property to the creditors. I put a big roadblock in the way, they probably have to go to court and try to challenge all this, it’s a big hurdle and gives (the client) some negotiating power,” he said, adding that there are strong laws protecting creditors in in Nova Scotia.

“Is it a good move from a legal perspective? Absolutely.”

Paul Trudelle, a partner at the Hull & Hull law firm in Toronto, said it’s not clear what Robertson is trying to protect herself from because he said it would be very difficult for those owed money by Quadriga to go after the founder’s widow personally.

“To the extent possible she’s trying to protect her personal property and in particular her interest in these properties [...] but there's a big question of what her personal liability would be,” he said.

“She gets that (property) free and clear of any claims, unless there's some fraudulent reason to set side the right of survivorship. It’s very hard to pierce the corporate veil and go after the directors or shareholders unless it's obviously a scam or fraud.”

Both Baxter and Trudelle said the activity surrounding the property is atypical.

“It’s unusual,” Trudelle said “And the fact that it’s happening so quickly and right now, it raises questions.”

The Quadriga case has been surrounded by controversy that started last January when CIBC froze roughly $25.7 million of its funds held in the account of a third-party processor. The circumstances surrounding Cotten’s death and the whereabouts of the millions of dollars owed to Quadriga’s users have only added to the intrigue, with some even speculating Cotten may not actually be dead.

On Tuesday, several sites shared a copy of a death certificate issued by an authority in India, The Chronicle Herald was able to verify a record of death for a “Gerald William Cottan (sic)” from the statistical directorate in the Rajasthan state of India where he died — the record lists his place of death as the Fortis Escorts Hospital in Jaipur.

With files from Nicole Munro, The Chronicle Herald, and The Canadian Press

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