RCMP, FBI two of four agencies investigating former crypto exchange Quadriga

Former QuadrigaCX CEO Gerald Cotten is shown in Paris on May 16, 2014. Cotten died in India in December, 2018. QuadrigaCX/Facebook

The accounting firm investigating the multimillion-dollar implosion of the QuadrigaCX cryptocurrency exchange wants to move the ongoing bankruptcy proceedings from Halifax to Toronto, saying the case is now focused on people and assets in Ontario.

Ernst and Young, in a court document filed earlier this week, has asked a Nova Scotia Supreme Court judge for the change in jurisdiction. The financial services company says the recent involvement of several law enforcement agencies and regulators has added to the complexity of a case that will require multiple court appearances in Toronto.

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Cryptocurrency founder transferred customers’ funds to his own accounts

“As the majority of the professionals are located in Ontario, there would be significant cost savings to transferring the proceedings to Ontario,” says the company, which is acting as QuadrigaCX’s bankruptcy trustee. “There are very few remaining ties to Nova Scotia at this time.”

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Both the FBI and the RCMP have confirmed they are investigating the downfall of QuadrigaCX, which was one of Canada’s largest cryptocurrency exchanges when it collapsed in January.

“The trustee is aware of at least four independent active law enforcement or regulatory reviews in progress, which have included inquiries or, in some cases, formal requests for documents and/or data disclosure,” the document says. “The trustee has received a formal request for documents and data from the RCMP financial crime division in Milton, Ont. … The RCMP has stressed the importance of dealing with the requests and any court proceedings … on an expeditious basis.”

READ MORE: QuadrigaCX timeline — and the many questions still to be answered

As for the QuadrigaCX users who lost money, 39 per cent were based in Ontario, 19 per cent were in British Columbia and 14 per cent were in Quebec. Only 1.4 per cent lived in Nova Scotia.

Quadriga Fintech Solutions, the parent company of QuadrigaCX, was granted protection from its creditors on Feb. 5. It entered bankruptcy proceedings on April 15. The transfer request, which has the support of QuadrigaCX’s affected users, comes less than two months after Ernst and Young accused the company’s late founder, Gerald Cotten, of creating fake trades and transferring customer funds into his personal accounts. Ernst and Young has also alleged Cotten transferred “significant volumes” of his customers’ cryptocurrency into other exchanges, where it was used as security for margin trading.

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Cotten, who ran the exchange from his home outside of Halifax, died suddenly in December while travelling in India. As the company’s CEO and sole director, he was the only one who had access to the so-called cold wallets that were supposed to hold his customers’ cryptocurrency. More than 76,000 unsecured creditors, virtually all of them QuadrigaCX clients, have come forward to claim they are owed $214.6 million — $74.1 million in cash and $140.5 million in cryptocurrency.

WATCH: Kelowna home owned by QuadrigaCX CEO left to wife in will

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Kelowna home owned by QuadrigaCX CEO left to wife in will

Ernst and Young says it has recovered more than $30 million, virtually all of it in cash. Affected users have until Aug. 31 to file a claim. Quadriga was registered as a business in British Columbia, but it had no real ties to the province, as the company had no offices and no employees. Meanwhile, Ernst and Young confirmed it is talking to lawyers representing Cotten’s widow, Jennifer Robertson, regarding the sale of personal assets that were purchased with Quadriga funds.

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“Some assets have been monetized to date,” the report says, though no details were offered.

Earlier this year, the court issued a so-called asset preservation order to prevent Robertson from selling about $12 million in assets belonging to her or Cotten’s estate. Those assets include properties in Nova Scotia and British Columbia, a small aircraft, “luxury vehicles,” a sailboat, investments, cash and gold and silver coins.

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