According to Bloomberg, major law firms in Canada in the likes of Bennett Jones LLP and McInnes Cooper have filed submissions prior to the scheduled February 14 hearing of QuadrigaCX to represent some of the crypto exchange’s victims.
As CryptoMeNow extensively reported throughout the past week, Canada’s largest crypto exchange allegedly lost access to its cold wallets containing around $150 million in crypto following the death of its CEO Gerald Cotten.
We have thousands of wallet addresses known to belong to @QuadrigaCoinEx and are investigating the bizarre and, frankly, unbelievable story of the founder's death and lost keys. I'm not normally calling for subpoenas but if @rcmpgrcpolice are looking in to this, contact @krakenfx
— Jesse Powell (@jespow) February 3, 2019
Crypto Losses are Generally in the Millions
Earlier this week, it was reported that a former software engineer saved up $422,000 throughout his 7-year career in the U.S. to move back to Canada, purchase a house, and settle down.
After facing some difficulties moving the funds from the U.S. to his home country, Tong Zou purchased crypto with his savings, transferred it to QuadrigaCX, and filed a withdrawal request in October 2018.
Since then, Zou has not heard back from QuadrigaCX and recently came across the extraordinary case of the exchange and the story about its missing $190 million in crypto and cash.
“It’s all my savings, so I’m just living on what little I have left and trying to start over. It pretty much took everything away from me. I wasn’t using it for trading — I just wanted to move my money over to my Canadian bank account. What I didn’t know was that my withdrawal would be pending or incomplete and it never got deposited in my bank account. I’ve been waiting four months so far.”
Law firms are competing with one another to win over victims like Zou who lost millions of dollars on the exchange.
Miller Thomson LLP, which is cooperating with Cox & Palmer, remains as the largest law firm duo in the QuadrigaCX case, representing 200 creditors who have combined losses of nearly $10 million.
Will Law Firms Find Any Success?
QuadrigaCX is currently said to be working with Ernst & Young to restructure the company and potentially secure an opportunity to sell the company to pay off creditors.
In a normal case, the exchange could sell its assets or find an investor that could pay back the creditors in a short period of time, as Coincheck did in January 2018 after suffering a $600 million hacking attack.
Main takeaways from Coincheck press conf:
– only NEM impacted
– plans to continue operating, restart trading
– not clear on plan to repay customers
– no multisig?
– wouldn’t admit security was weak
– not sure how hacked, if domestic or foreign hackers
– CEO barely spoke
— Yuji Nakamura (@ynakamura56) January 26, 2018
However, due to the uncertainties surrounding the whereabouts of the company’s funds and the release of several reports pointing toward the nonexistence of cold wallets for both Bitcoin and Ethereum, the exchange will have to first go through an audit process with Ernst & Young.
Speaking to The Wall Street Journal, cryptocurrency researcher James Edwards said:
“None of the withdrawal addresses provided by customers led to a wallet that could be considered anything comparable to a ‘reserve’ wallet.”
If the cold wallets do not exist as some analysts suggest, then it will be very difficult for creditors to obtain their money back in the future regardless of the outcome of the lawsuits.
Due to recent cases of cryptocurrency-related kidnapping and other types of crime, investors including Ryan Kneer have decided to keep the amount of money the exchange owes private for personal safety.
“Among other reasons for protecting their privacy, individuals who own large quantities of cryptocurrency have been targeted for theft, phishing and even assault,” Kneer said.