In an attempt to restructure their affairs, beleaguered cryptocurrency exchange QuadrigaCX has filed for protection under Canada’s Companies Creditors Arrangement Act (CCAA) to address their ongoing financial issues. The CCAA is federal legislation which allows insolvent corporations owing in excess of $5MM a chance to restructure their business and financial affairs.
Ongoing issues surrounding fiat deposits and withdrawals had been going on for some time, and reached a head with CIBC freezing ~$28MM CAD due to mismanagement and an ownership dispute of the funds. The funds had been released, however, middleman payment processor Billerfy claimed it could not find a banking partner to endorse the drafts, meaning it was unable to send fiat to the exchange ultimately rendering QuadrigaCX unable to process fiat withdrawals.
The sudden December passing of QuadrigaCX’s Chief Executive Officer, Gerald Cotten, from complications with Crohn’s Disease while travelling in India and building an orphanage in the country, seems to also have complicated matters. In a statement on the company’s website dated January 31, 2019, the company claimed to have trouble locating the keys to their cold storage reserves: “…liquidity issues, which include attempting to locate and secure our very significant cryptocurrency reserves held in cold wallets, and that are required to satisfy customer cryptocurrency balances on deposit.”
The closing of QuadrigaCX has hit close to home for NDAX and its employees. The founding team are all very familiar with the QuadrigaCX story and built NDAX to address the issues Canadians encountered in cryptocurrency trading and at this time would like to reassure our clients and the public with respect to our business model.
From day one NDAX realized security and accessibility of clients assets were a number one priority. So firstly, NDAX registered as a Money Services Business with FINTRAC. This helped the company secure a solid banking relationship with a Canadian based bank to provide traditional banking services to clients. Moreover, clients’ funds are held in a segregated bank account keeping these monies separate from NDAX’s operating capital; the entire amount of client deposits in this account are fully guaranteed by the Alberta government.
The majority of NDAX’s cryptocurrency reserves (95-98%) are held offline in air gapped cold storage and protected by Multi Signature Technology. This means that not just one of the management team holds the keys but a combination of management is required to access cold storage. The keys are distributed such that if one team member passes, the remainder will be able to access the cold storage. The company has also engaged in succession planning and are crossed trained should one of the management team members leave the company. Further, the remaining 2-5% held in the hot wallet is insured.
NDAX’s vision is to make cryptocurrency trading accessible and safe for Canadians who expect and require the protection of a more traditional financial framework.