QuadrigaCX CEO Used Personal Money to Fund Exchange During Litigation With Bank in 2018

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The late founder of Canadian crypto exchange QuadrigaCX, Gerry Cotten, was purportedly funding the exchange with his own money while it was in litigation with a major Canadian bank. Cotten’s widow Jennifer Robertson revealed details about the exchange’s financial situation in a statement published on March 13.

The statement reads that Cotten was putting his own money into Quadriga to fund user withdrawals in 2018, after the Canadian Imperial Bank of Commerce (CIBC) had frozen five accounts holding $21.6 million. Robertson stated:

“While I had no direct knowledge of how Gerry operated the business, he told me that he had been putting his own money back into QCX to fund user withdrawals in 2018 while the CIBC money remained frozen. I believe Gerry had the best interests of the business in mind, and cared for his customers.”

At the time, the CIBC froze accounts belonging to the exchange’s payment processor, Costodian Inc., and its owner, Jose Reyes, purportedly due to an inability to identify the funds’ owners.  The CIBC then requested the court to withhold the disputed funds and decide whether they belong to QuadrigaCX, Costodian, or the 388 users who had deposited the funds.

Quadriga subsequently told the court that the bank froze the funds mistakenly, and claimed to be the undisputed owner of the greater part of the funds as there was “no evidence” of competing claims.

In the recent statement, Robertson also revealed that the legal firm currently representing the exchange will cease its association with Quadriga CX, apparently due to a conflict of interest. The statement reads:

“I have been advised by Stewart McKelvey that, in light of concerns regarding a potential conflict of interest that have been raised as a result of information which has come to the attention of the Monitor since the start of the CCAA [Companies’ Creditors Arrangement Act] process, they have withdrawn from representing QuadrigaCX (QCX) and the other applicant companies in the CCAA process.”

Earlier in March, Robertson asked the court for $225,000 in compensation for legal costs for financing used to help the crypto exchange acquire court-approved protection from creditors. After $145 million in crypto assets went missing following Cotten’s death, Robertson provided interim financing for legal proceedings.

While the issue of repaying Robertson was reportedly discussed in court, the law firm representing QuadrigaCX’s affected clients, Cox & Palmer argued that repayment should not be granted until Ernst & Young — the court monitor — has reviewed asset and transaction information from Cotten’s estate.