By: Wilson Kwan, CPA, CA, CIRP, LIT
In 2018, QuadrigaCX ("QCX") was one of the largest cryptocurrency exchanges in Canada, facilitating millions of dollars of transactions everyday for Canadian and participants worldwide. This, however, came to an abrupt stop in January 2019 when the website went dark and users who had requested withdrawals had not been answered for months.
"The collapse of Quadriga caused massive losses for investors from Canada and around the world. On January 14, 2019, Quadriga announced that Cotten had died in India the previous month. By February 5, the Quadriga platform had ceased operations and filed for creditor protection. Over 76,000 clients were owed a combined $215 million(Open footnote) in assets. Approximately 40% of these clients were Ontarians." - OSC Report
In 2017, long before the mainstream nature of blockchain and cryptocurrency today, I mined Ethereum with graphic cards that you could purchase at the local computer shop, amassing over 17 GPUs in my small apartment in Toronto. This personal hobby gave me the unique knowledge on 1) what crypto was, 2) how it operates, 3) how you earn passive income, and 4) a further deep dive into the whole economy such as proof of stake, proof of capacity and other potential use cases of blockchain. I was also a personal user of the QCX platform and had done so successfully many times, until, unfortunately, I too, was tied up in the QCX bankruptcy.
When QCX went offline, leaving several customers, investors, and now creditors (the "Affected Users") furious with their current predicament. I knew the company was headed into a court-appointed insolvency proceeding (known as a CCAA) from my professional experience as a Licensed Insolvency Trustee (with PwC, at the time). Instead of reaching out to lawyers and colleagues, putting together pitch decks and statements of qualifications, I went straight to where the users were congregating, on Reddit and Telegram.
On Reddit, I saw the growing concern and frustration with Affected Users and that evening, I posted a 1,500-word post outlining the FAQs of CCAA and what it means for Affected Users. By the next morning, I had over 100 likes, over 80 comments, and was the top-rated post in the r/QuadrigaCX section which ultimately led to the Affected Users adopting the right next steps, finding insolvency legal counsel and not wasting time on a class action lawsuit!
Within a day, I was able to reach out to an insolvency lawyer to join my efforts in helping the Affected Users. Through the use of the Telegram app, we guided discussions and provided FAQs for the distraught Affected Users and answered all of their questions throughout the entire weekend. We also set up conference calls on the weekend to have a wider reach and help answer burning questions directly from the Affected Users. These close interactions eventually led to the Affected Users being overwhelmingly supportive of legal counsel which ultimately retained them as Representative Counsel for the Affected Users.
The law firm that was engaged continues to help the Affected Users today and be the middle person while engaging with the Trustee. To date, over $46 million has been recovered, which is unfortunately short of the approximately $215 million in outstanding claims. Overall, we are still rooting for the best outcome and hopefully a resolution in the near future.
