After a fiasco with its sole private key being lost, the QuadrigaCX cryptocurrency exchange has been recommended by its court-appointed monitor to file for bankruptcy. This would help cost costs and facilitate the recovery of assets, the monitor says.

The hack of QuadrigaCX is one of the strangest losses of exchange funds in recent memory. After its founder, Gerald Cotten, died in December, the exchange has been at a loss on how to recover the cryptocurrencies held in cold storage. The Vancouver-based exchange owes about 115,000 clients some $195M.

Ernst & Young has been its court-appointed monitor in these times, advising the company on how to best proceed. As of now, the monitor assessed that the possibility of restructuring “appears remote” and would be more effectively handled in bankruptcy.

Bankruptcy would bring a few things to the table. Namely, it would give trustees more investigatory powers, such as the right to seek examinations under oath. It would also open the door to selling the exchange’s assets — especially the platform itself, which is still operational.

Quadriga’s Red Flags

Despite the recommendation, Ernst & Young has some suspicions that foul play is at work.

Cotten was known for mixing personal affairs with business and there is the possibility that these exchange funds were used to acquire assets outside the company. All assets on Cotten’s estate, as a result, will soon be frozen, including all his other subsidiaries.

Cotten’s early partner when he formed Quadriga was also a convicted criminal. Omar Dhanani, the co-founder, served 18 months in federal prison related to bank-and-credit card scams, along with identity theft. Thus, a dark cloud looms over the entire case — with many suspecting the official story to be a hoax.

Uncooperative Third Parties Holding Crypto Funds

To make matters worse, many of the third parties holding customer funds have failed to be cooperative. For example, WB21, believed to hold a “significant amount of funds,” has been utterly uncooperative in assisting Ernst & Young with its investigative proceedings. In many cases, not even basic information was provided — with many responding with radio silence.

Because of the difficulty in assessing the viability of returning these funds to customers, Ernst & Young has stated the possibilities of future collections remain “uncertain” — which may be better phrased as ‘unlikely.’

The Quadriga saga is starting to look more and more like a fraud on many levels. Given that the third-parties are opting for silence and the shady nature of the exchange’s founding, it would not be far-fetched to assume that more malicious forces are at play.

Will any of the funds be retrieved? Do you believe the official story to be true? Let us know your thoughts below.