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Ernst & Young (EY) issued a preliminary Trust Report for the failed Canadian crypto exchange QuadrigaCX. The 50-page report can effectively be reduced to

“Most of your money is gone, and we’ll probably never find it again.”

According to the report, submitted on May 1 and published on the EY website on May 10, Quadriga owes a total of CA $ 215 million but only has around CA $ 29 million to distribute to its 76,319 affected users.

The report addresses the assets and debts of three legal entities:

  • 0984750 BC Ltd: had CA $ 28,649,542 owed CA $ 215,697,147.
  • Fintech Solutions: had CA $ 254,180 owed CA $ 214,873,113.
  • Whiteside Capital: had zero assets owed CA $ 214,618,937.

EY says that,

“a complete and exhaustive review of Quadriga’s financial issues will take considerable time and effort and may not be possible or cost-effective to complete”.

It is based on unaudited information for this report.

Most of the EY report emphasizes what we already know, but it is worth reading the first 14 pages. The rest are mostly appendices.

To remember, Quadriga requested the protection of creditors in accordance with the Companies Creditors’ Agreements Act (CCAA) on February 5. He is currently in transition to bankruptcy, a process that will be completed on June 28. EY is the monitor appointed by the court in Quadriga CCAA procedures and the trustee in its bankruptcy proceedings.

Most of Quadriga’s available cash comes from the Custodian third-party payment processor. In January 2018, the Custodian bank froze about CA $ 25.7 million in funds that Costodian had on behalf of Quadriga. When Quadriga requested protection from the creditor, Costodian signed the drafts to EY, who worked with the Royal Bank of Canada to accept the drafts. EY put most of that money in a”disbursement account”.

According to EY,

“Quadriga takes the position that no additional fees are paid.”

EY is working with Costodian’s lawyer to solve the problem. If the parties can not reach an agreement, they will go back to court.

EY has placed CA $ 720,000 of Quadriga money in a reserve account to address the final obligations of CCAA.

Quadriga also had some cryptography in her hot wallets. Those funds have been safely moved to cold wallet storage offline under EY control. The funds include approximately BTC 61.33, BCH 33.32, BTG 2.66, LTC, 851.73, ETH 960.36. In its report, EY estimates that these funds have a value of CA $ 500,000.

The “bulk drafts” worth CA $ 5,838,125.92 were issued in 1009926 BC Ltd., a “third party” payment processor, managed by Aaron Vaithilingam, former manager of the Quadriga office. The company had dissolved, so it was impossible to cash checks.

EY reinstalled 1009926 BC Ltd., and the checks were signed and deposited into the disbursement account on April 18. EY retained the money in the disbursement account for 30 days, in case of any “bank resource problem”, before sending it to the Quadriga bankruptcy account.

There is still a possibility that more funds from Quadriga can be recovered. Quadriga’s money is still held by several third-party payment processors, mainly BlackBanx (formerly WB21), which allegedly owns 12 million Canadian dollars of Quadriga funds. EY says he continues to work on the matter, but does not know how much he can recover.

EY is also investigating other cryptographic exchanges where Quadriga allegedly stored part of its cryptography.

EY negotiated a voluntary conservation order on Robertson’s estate. EY says that its assets can be worth CA $ 12 million.

Fintech and Whiteside

A few months ago, EY learned of CA $ 254,180 that Quadriga had hidden in a Canadian credit union and forgot all about it. The account, which had been frozen since 2017, was kept under Quadriga Fintech Solutions, but the money belonged to the Quadriga operations (0984750 BC Ltd.).

EY writes:

“The estimated net realizable value of the account receivable from the Fintech Account is net of the estimated bankruptcy administrative costs of Fintech.”

There are still doubts about what happened with CA $ 190 million in funds, mostly cryptographic, that apparently have disappeared from the chariot. EY says he intends to submit a research report by the end of June.

The views and opinions expressed in the article “Most of your Money is Gone, We’ll Probably Never Find it Again” do not reflect that of 48coins, nor of its originally published source. Article does not constitute financial advice. Kindly proceed with caution and always do your own research.

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