Judge Delays Decision On Legal Representation for Quadriga Creditors
A Canadian judge declined to name any law firms to represent as many as 115,000 users of QuadrigaCX, deferring that significant decision by a week.
Nova Scotia Supreme Court Judge Michael Wood said during a hearing Thursday that he would not appoint any firms as representative counsel or make any other decisions regarding creditor representation immediately, though he plans to have a final decision within the week.
Wood did, however, shoot down a proposal which would have delayed the process even further.
As CoinDesk previously reported, three legal teams have formally applied for the position of representative counsel: Bennett Jones with McInnes Cooper, Miller Thomson with Cox and Palmer and Osler, Hoskin and Harcourt with Patterson Law. Another law firm, Goodmans LLP, wrote a letter calling for an extended appointment process, saying a committee of creditors who can coordinate should be created beforehand.
Whichever law firm team is appointed would be tasked with coordinating between Quadriga as it seeks to recoup roughly $196 million it owes its creditors and those whose balances are stuck on the exchange specifically.
The representative counsel may also begin preparatory work for a class action lawsuit, though such a suit cannot be filed during a court-imposed stay of proceedings. That stay is set to expire March 7 barring any further action on that front.
Money troubles
The question of who will represent Quadriga’s customers aside, Thursday’s hearing also touched on the funding issues surrounding the recovery efforts.
Professional services firm EY, a court-appointed monitor for Quadriga, explained in court Thursday that its oversight (along with lawyers’ fees) was being funded through a $300,000 lump sum dedicated to the process. Of this, $250,000 has already been spent, and the firm estimated that its runway would last for no more than two weeks.
EY has not yet received any funds from the payment processors holding Quadriga’s fiat balances, it said in a report published earlier this week. The companies are working with some of these processors to have the exchange’s funds released, though at least one is claiming it “has the right to continue to hold funds.”
The firm was not named, though in previous court filings, Quadriga identified WB21 as a payment processor which refused to release funds to the exchange. WB21 did not immediately respond to a request for comment.
The report also touched on the issues involved with pulling funds out of processors thta are cooperating with the monitor, noting that one unnamed firm was holding roughly $25.2 million CAD ($19 million USD) for the exchange.
Billerfy, a payment processor for Quadriga, previously told CoinDesk it was holding that amount in the form of bank drafts while it sought a banking partner who would endorse – and therefore, cash out – the funds.
José Reyes, Billerfy’s managing director, said at the time that the company was having difficulty finding a bank willing to work with crypto-related funds, causing delays.
Tuesday’s report added:
“Counsel for the Applicants and the Monitor have been in contact with legal counsel for this payment processor. There are various issues to address, however, discussions between the parties have been positive to date.”
A separate group of bank drafts held by another unnamed third-party processor has been transferred to Stewart McKelvey, the law firm representing Quadriga, according to EY’s report. These drafts are currently being cataloged.
The report did not specify what the total value of these drafts was, though in its initial filing, Quadriga identified some $565,000 being held by a total of three processors.
A hearing will be held on Feb. 22 to help facilitate the transfer of these funds to EY.
Attorneys for EY and Quadriga apparently did not discuss how efforts to recover $136 million in cryptocurrencies currently locked in cold wallets are proceeding.
Hat tips to Jack Julian of the Canadian Broadcasting Corporation and Matt Stickland of The Signal.