Consultancy firm to investigate blockchain transactions in QuadrigaCX case

Lawyers representing creditors of the collapsed exchange QuadrigaCX have hired blockchain forensics specialists to help with the ongoing investigation.

The Canadian law firm representing creditors of the defunct crypto exchange QuadrigaCX has hired consultancy firm Kroll to advance its investigation into $190 million lost in user assets in early 2019.

As reported, controversy has engulfed QuadrigaCX following the death of its founder, Gerald Cotten, in December 2018, who had purportedly been the sole person with access to the exchange’s cold wallet holdings. 

In a notice to creditors on Sept. 8, Miller Thomson said that Kroll will be working in collaboration with its strategic partner, Coinfirm, which specializes in blockchain forensics and anti-money laundering (AML) compliance. 

Coinfirm is the developer of a blockchain analytics engine that is designed for crypto asset tracing, fraud investigations, data analytics and asset recovery.

According to Miller Thomson’s update, Kroll and Confirm will be tasked with analyzing a subset of transaction data. Citing the sensitive nature of these transactions and the ongoing involvement of law enforcement, the notice states that further details of Kroll’s engagement will not be publicly elaborated. 

Kroll’s fees have been capped to $50,000 and the company has contractual indemnity of up to $150,000. Its engagement was jointly decided by Miller Thomson, the inspectors of QuadrigaCX’s bankruptcy estate and an appointed Official Committee of Affected Users.

Miller Thomson’s update also reveals that it has forwarded information about the controversial Panama-based payments processor Crypto Capital, which provided services to QuadrigaCX prior to the exchange's collapse, to Quadriga’s monitor Ernst & Young.

“There is currently insufficient evidence to establish that Crypto Capital owed any funds to Quadriga as of the date of bankruptcy,” Miller Thomson states. However, should any new information arise regarding the matter, Ernst & Young “will consider recovery avenues available to the Quadriga estate.”

Lastly, the notice suggests that compensation of creditors is likely to remain a protracted process. “The most material impact on the speed of distribution will be the CRA [Canada Revenue Agency]’s audit of Quadriga’s tax liabilities,” Miller Thomson states. 

The CRA has reportedly declined to confirm a timeline for completion of its audit given the disruptions caused by the coronavirus pandemic.