On Feb. 5, the Supreme Court of Nova Scotia granted Quadriga CX creditor protection for 30 days, under the Companies’ Creditors Arrangement Act. The company is represented by Maurice Chiasson and Sara Scott of Stewart McKelvey and the court appointed Ernst & Young Inc. as monitor of the process, which will be represented by Elizabeth Pillon and Lee Nicholson of Stikeman Elliott LLP.

In a statement made Feb. 5, the company said it filed for creditor protection because it has been unable to access its customers’ crypto-currency and could not get the funds to settle customer withdrawal requests.

Historically, the threat to cybersecurity in crypto-platforms has typically been a breach from an outside third party. What makes the case of Quadriga CX unique, says Phull, is that the exact opposite is the problem. The money is locked, as if in an indestructible safe with no way to open it. The security of blockchain technology became its peril, as the only way to access the wallets containing the digital currency died with the owner of the exchange, Gerry Cotten, who left no password behind.

“I'm hoping this case illustrates the importance of not just data security from the standpoint of breaches but also data security from the standpoint of putting these impenetrable locks on data that can never be accessed again because of irresponsible conduct,” says Phull, whose firm focuses on data privacy and cybersecurity.

Regulators around the world wrestle with crypto-currency’s ambiguous status — certain types in certain contexts can take the form of a currency, commodity or security, all of which apply different regulatory frameworks. In Canada, crypto-currency does not meet the legal definition of money and most regulators are treating it as a commodity, but it can also be used as an investment contract, for example, to raise funds for a startup, in which case it is a security, says Phull.