Quadriga sparks race among lawyers for slice of lost millions
Legal firms competing to represent account holders
Canada’s top law firms are set to converge this Valentine’s Day on a Halifax courtroom, competing for a piece of the $260million mystery behind the Quadriga CX cryptocurrency exchange.
The lawyers are contending for the right to represent some 115,000 Quadriga customers who are owed about $190 million in Bitcoin and other digital assets plus another $70 million in cash in court proceedings involving the shuttered exchange.
Quadriga was granted creditor protection last week in Nova Scotia Supreme Court, halting any lawsuits while the firm seeks to restructure with the help of Ernst & Young.
The Vancouver-based company has been unable to access the millions in bitcoin and other cryptocurrencies belonging to its customers since its chief executive officer, Gerald Cotten, died in December, taking the accounts’ digital passwords to the grave. Bennett Jones LLP and McInnes Cooper were first to submit a request to represent users, with retail investor Tong Zou claiming he was “one of the largest affected individual users” and forwarding his name in an affidavit that included five other named account holders. Since then, one of those holders has withdrawn from the group, leaving 141 affected users with $11.9 million of cash claims and $1.11 million in cryptocurrency, according to a Monday court filing.
Other law firms have come forward, filing competing submissions ahead of Thursday’s hearing before Nova Scotia Supreme Court Justice Michael Wood, who may then appoint counsel to represent those account holders. For the law firms, such an opportunity would give them a slice of the administrative charges from the process to cover their professional fees.
Osler, Hoskin & Harcourt is working with Patterson Law and seeking to represent people such as Richard Kagerer, a software consultant from British Columbia who’s owed $19,900 in crypto and U.S. dollar balances. He’s been down this road before: Kagerer’s company is one of the creditors for Japan’s Mt. Gox exchange, which entered insolvency proceedings in 2014. Kagerer also said in his Monday statement that he was “among a small number of customers” who filed claims in court when another Canadian cryptocurrency exchange shut down a few years ago.
Osler also has support from Ryan Kneer and Giuseppe Burtini. Kneer, a Calgary resident, has been involved in cryptocurrency since 2013 and is a professional market maker for the crypto market and a developer of automated trading software, according to his statement.
Like Tong, Kneer has been communicating with other Quadriga account holders through the Telegram instant messaging application. He chose not to disclose the amount of his claim — for good reason: Many affected users are “deeply concerned about protecting their privacy,” he said in his filing. “Among other reasons for protecting their privacy, individuals who own large quantities of cryptocurrency have been targeted for theft, phishing and even assault.”
Burtini, a resident of Kelowna, B.C., said he is a representative of an unidentified blockchain company that sold tokens on Quadriga’s trading platform and had “a significant multimillion-dollar fiat (CAD) currency balance with Quadriga,” according to his Friday sworn statement. The company has been requesting payment of its balance from Quadriga for a year. In his affidavit, he said Osler has 59 users mostly from Canada with a total of $12.4 million of claims.
Canada’s Companies’ Creditors Arrangement Act process has the ability of bringing forward a law firm to work with a monitor and represent the interests of a vulnerable group, typically the employees and pensioners.