As Canadian fiat/Bitcoin interface QuadrigaCX seeks bankruptcy relief in the wake of its founder dying with most of the keys, the monitor's latest report tells an almost Shaversesque tale of your loss. The monitor tells the tale of the late Mr. Cotten moving fiat and Bitcoin denominated funds freely from his platform and to other fiat/Bitcoin interfaces while using an accounting system completley opaque to the rest of his Quadrigans. The full report is presented in its entirety below:
2019 Hfx No. 484742 IN THE SUPREME COURT OF NOVA SCOTIA IN THE MATTER OF: Application by Quadriga Fintech Solutions Corp., Whiteside Capital Corporation and 0984750 B.C. Ltd. dba Quadriga CX and Quadriga Coin Exchange (collectively referred to as the “Applicants”), for relief under the Companies’ Creditors Arrangement Act FIFTH REPORT OF THE MONITOR June 19, 2019 June 19, 2019 STIKEMAN ELLIOTT LLP Barristers & Solicitors 5300 Commerce Court West 199 Bay Street Toronto, Canada M5L 1B9 Elizabeth Pillon LSO#: 35638M Tel: (416) 869-5623 Email: lpillon@stikeman.com Maria Konyukhova LSO#: 52880V Tel: (416) 869-5230 Email: mkonyukhova@stikeman.com Lee Nicholson LSO#: 66412I Tel: (416) 869-5604 Email: leenicholson@stikeman.com Fax: (416) 947-0866 Lawyers for the Monitor, Ernst & Young Inc. 2019 Hfx No. 484742 IN THE SUPREME COURT OF NOVA SCOTIA IN THE MATTER OF: Application by Quadriga Fintech Solutions Corp., Whiteside Capital Corporation and 0984750 B.C. Ltd. dba Quadriga CX and Quadriga Coin Exchange (collectively referred to as the “Applicants”), for relief under the Companies’ Creditors Arrangement Act FIFTH REPORT OF THE MONITOR June 19, 2019 INTRODUCTION 1. On February 5, 2019 (the “Filing Date”), Quadriga Fintech Solutions Corp., Whiteside Capital Corporation and 0984750 B.C. Ltd. (“Quadriga” or the “Company”) d/b/a Quadriga CX and Quadriga Coin Exchange (collectively, the “Applicants”) were granted protection from their creditors by the Nova Scotia Supreme Court (the “Court”) under the Companies’ Creditors Arrangement Act (the “CCAA”). Pursuant to an Order of Justice Wood dated February 5, 2019 (the “Initial Order”), Ernst & Young Inc. (“EY”) was appointed as the monitor (the “Monitor”) of the Applicants in these CCAA proceedings. 2. On April 11, 2019, a Termination and Bankruptcy Assignment Order (the “Termination Order”) was issued by Justice Wood approving the process by which the Applicants’ CCAA proceedings would transition to bankruptcy proceedings (the “Bankruptcy - 3 - Proceedings”) under the Bankruptcy and Insolvency Act (the “BIA”). On April 15, 2019, each of the Applicants were assigned into bankruptcy. PURPOSE 3. The purpose of the Fifth Report of the Monitor (the “Fifth Report”) is to provide the Court and stakeholders with an interim report on the Monitor’s investigations into the business and affairs of the Applicants and its previous sole director Gerald Cotten. 4. The investigation, realization and distribution process for the benefit of the affected users will continue to be pursued via the Bankruptcy Proceedings. Future reports associated with these activities will be completed by Ernst & Young Inc. acting in its capacity as Bankruptcy Trustee (the “Trustee”). 5. The Monitor has structured the Fifth Report as follows (all capitalized terms are as defined in the balance of the Fifth Report): (a) Investigation Update i. Executive Summary; ii. Interim Investigation Procedures; iii. Overview of Quadriga Business; iv. Affected Users; v. Recoveries to Date; vi. Recovery Efforts on Devices and Accessible Information; - 4 - vii. Security of the Operating Platform and AWS Data; viii. Books and Records; ix. Quadriga Operating Platform and Database; x. Blockchain Analysis; xi. Operational Issues; xii. Potentially Inappropriate Use of Affected Users’ Funds; xiii. Gerald Cotten Platform Activities; xiv. Quadriga Profitability Comments; and xv. Next Steps in the Investigation (b) Third Party Payment Processor Update TERMS OF REFERENCE 6. In preparing this Fifth Report, the Monitor has relied upon unaudited financial information, the Company’s books and records, financial information prepared by the Company (the “Information”) and discussions with the Applicants’ directors, senior management team, consultants (“Management”) and legal advisors. The Monitor has not audited, reviewed or otherwise attempted to verify the accuracy or completeness of the Information in a manner that would wholly or partially comply with Generally Accepted Assurance Standards (“GAAS”) pursuant to the Chartered Professional Accountants Canada - 5 - Handbook, and accordingly the Monitor expresses no opinion or other form of assurance in respect of the Information. 7. Except as otherwise stated, the Monitor’s understanding of factual matters expressed in this Report concerning the Applicants and their business is based on the Information, and not independent factual determinations made by the Monitor. 8. The Monitor has relied upon the information available to it from Quadriga, its independent contractors and other parties with historical involvement with Quadriga. The Monitor has attempted to independently review and corroborate the information received, where possible. The Monitor notes the lack of formal books and records and inability to access certain encrypted devices have limited the Monitors review. Given Mr. Cotten’s death, a key corporate representative was not available and the Monitor was not able to seek an explanation or justification, if any, for the preliminary observations and findings outlined herein. The comments below reflect the Monitor’s current understanding and assessment of the information received to date. The Monitor notes further information could arise during the course of the Bankruptcy Proceedings, which may impact some of the observations below and the Monitor’s understanding and assessment are necessarily preliminary. The Monitor believes it is important for the Court and Users to have the opportunity to review the results of the investigation to date. The Report is subject to the limitations expressed herein. 9. Unless otherwise stated, all monetary amounts contained herein are expressed in Canadian dollars. - 6 - INVESTIGATION UPDATE Executive Summary 10. The Monitor’s preliminary investigation identified the following principal concerns which it believes contributed to the current situation facing Quadriga and its Users: (a) Quadriga’s operating infrastructure appears to have been significantly flawed from a financial reporting and operational control perspective. Activities were largely directed by a single individual, Mr. Cotten and as a result, typical segregation of duties and basic internal controls did not appear to exist; (b) No accounting records have been identified by the Monitor and there appears to have been no segregation of assets between Quadriga Funds and User Funds. Funds received from and held by Quadriga on behalf of Users appear to have been used by Quadriga for a number of purposes other than to fund User withdrawals. With its available infrastructure, Quadriga does not appear to have had visibility into its profitability, if any; (c) The Company appears to have engaged in significant “cash” transactions. The Monitor has been unable to verify if cash deposits were deposited into accounts containing User Funds and or properly recorded; (d) The Monitor has been unable to locate basic corporate records including the location and security passwords associated with Quadriga’s Fiat and Cryptocurrency inventories between TPPs, bank accounts, wallet addresses and third-party exchanges. In addition, the Monitor understands passwords were held - 7 - by a single individual, Mr. Cotten and it appears that Quadriga failed to ensure adequate safeguard procedures were in place to transfer passwords and other critical operating data to other Quadriga representatives should a critical event materialize (such as the death of key management personnel); (e) The Company relied extensively upon the services of TPPs to administer its fiat treasury functions. Adequate governance arrangements, oversight or reporting functions in relation to Fiat maintained by these third parties does not appear to have been in place; (f) User Cryptocurrency was not maintained exclusively in Quadriga’s hot and cold wallets. Significant volumes of Cryptocurrency were transferred off Platform outside Quadriga to competitor exchanges into personal accounts controlled by Mr. Cotten. It appears that User Cryptocurrency was traded on these exchanges and in some circumstances used as security for a margin trading account established by Mr. Cotten. Trading losses incurred and incremental fees charged by exchanges appear to have adversely affected Quadriga’s Cryptocurrency reserves. In addition, substantial amounts of Cryptocurrency were transferred to wallet holders whose identity the Monitor has been unable to confirm; (g) Mr. Cotten created Identified Accounts under aliases where it appears that Unsupported Deposits were deposited and used to trade within the Platform resulting in inflated revenue figures, artificial trades with Users and ultimately the withdrawal of Cryptocurrency deposited by Users; and - 8 - (h) Substantial Funds were transferred to Mr. Cotten personally and other related parties. The Monitor has not located any support justifying these transfers. Interim Investigation Procedures 11. The investigation into Quadriga’s business and affairs has been challenging due to the limited books and records available to review, limited parties with institutional knowledge, reporting limitations within the Platform, the complexities of blockchain analysis coupled with limited reliable data, and Quadriga’s reliance upon TPPs to facilitate the Fiat treasury functions through multiple service providers, all combined with the volume of transactions processed by the Company. 12. The Monitor continues its efforts to assemble supporting documentation and information necessary to analyze Quadriga’s business and affairs. To date, the Monitor has: (a) taken possession of an inventory of devices belonging to Mr. Cotten reportedly used in the day to day management of the business. Certain of these devices have been accessed by the Monitor and a preliminary analysis of the contents conducted. In other cases, the devices are encrypted and as a result, the Monitor has been unable to access the content; (b) been unable to locate any traditional books and records, including accounting records documenting Quadriga’s financial results and operations following 2016. Quadriga appears not to have maintained a general ledger or traditional accounting records since at least 2016; - 9 - (c) obtained access to certain of Mr. Cotten’s e-mail and other communication records. The Monitor understands Mr. Cotten used multiple communication methods and services, including encrypted e-mail services and chat communications which cannot be accessed; (d) held preliminary discussions with two of the Directors and with certain of the primary independent contractors having institutional knowledge of Quadriga’s business and affairs; (e) preserved the Platform, including all transactional details maintained therein necessary to evaluate User claims; (f) assembled and analyzed Fiat transaction records from certain TPPs. Efforts by the Trustee to secure additional TPP information including bank account statements from various financial institutions involved with the Quadriga business are ongoing; (g) assembled and analyzed Cryptocurrency records and performed preliminary blockchain analysis using information obtained from the Platform and independent third-party exchanges where Mr. Cotten maintained accounts. Efforts by the Trustee to obtain additional transaction details with unresponsive third-party exchanges linked to the Quadriga business and accounts maintained by Mr. Cotten are continuing; (h) reviewed the initial investigative report prepared by an external consultant following Mr. Cotten’s death; - 10 - (i) held preliminary discussions with Mr. Cotten’s widow, Jennifer Robertson, in relation to assets under her control now subject to the Asset Preservation Order; and (j) responded to communications from regulatory agencies and communicated the Monitor’s interim information and assessments to law enforcement and regulatory officials and cooperated with agency requests where made. Overview of Quadriga Business 13. The nature of Quadriga’s business has been described in earlier Reports and affidavits filed in the CCAA proceedings. As noted in this Fifth Report, the manner in which the Quadriga business in practice operated differed from the preliminary description. Below is the Monitor’s understanding of the overall Quadriga business model. 14. Quadriga operated a cryptocurrency exchange platform allowing Users to store, buy and sell various cryptocurrencies from its online operating platform (the “Platform”) through its website at www.quadrigacx.com. Users could transact in Canadian dollars, US dollars (collectively “Fiat”), Bitcoin, Bitcoin Cash S.V., Bitcoin Cash, Bitcoin Gold, Litecoin and Ethereum (collectively “Cryptocurrency”). Quadriga earned transaction fees as a percentage of all Fiat transactions and Cryptocurrency trades on the Platform. Users were not charged a fee to deposit or withdraw Cryptocurrency to or from the Platform. 15. The Platform allowed Quadriga users (the “Users”) to create accounts on the Platform (the “Accounts”) and deposit Fiat and Cryptocurrency (collectively “Funds”) into those Accounts with Quadriga. Deposits were initiated by Users logging into his/her Account, - 11 - creating a deposit transaction and sending Funds to Quadriga via one of the approved Quadriga deposit methods. A Quadriga representative would then manually verify the receipt of Funds and note the deposit as having been received in the Platform. The Users’ Account was then credited with the applicable currency. Users could then place buy or sell orders on the Platform to trade Fiat for Cryptocurrency, exchange Cryptocurrency for another Cryptocurrency, or trade Cryptocurrency for Fiat. If a counterparty for an order was found within the Platform a trade would occur resulting in the Users’ respective Fiat and Cryptocurrency Account holdings being debited and/or credited with applicable Funds less transaction fees. 16. The terms and conditions on Quadriga’s website governing the use of the Platform are attached as Appendix “A”. Fiat Transactions 17. Due to the nature of its business, Quadriga was limited in its ability to open or maintain bank accounts in its name and had to rely upon third party payment processors (“TPPs”) to administer its Fiat treasury functions including storing Fiat deposited by Users. Quadriga entered into arrangements with a number of different parties that acted as TPPs. Users could deposit and withdraw Fiat through several processing options including cash transactions, bank wires, electronic fund transfers, credit card postings and postal money orders, generally all managed through TPP accounts. Custody of User Fiat was maintained within the TPP bank accounts. 18. Upon creating a Fiat deposit transaction on the Platform and sending Funds, users would generally upload support documentation associated with the Fiat deposit to the Platform. - 12 - The support documentation was tagged to the particular deposit transaction. This appeared to allow Quadriga representatives to determine to which TPP account the Fiat was sent and to verify receipt. Support documentation uploaded by Users for Fiat deposits typically included either originating bank account details, e-mail correspondence, credit card information, customer addresses, tracking numbers, voucher codes, copies of bank drafts, wire details or other bank verification support as applicable. 19. In reviewing a small selected sample of User deposit records on the Platform, the Monitor identified various User Fiat deposits where no supporting documentation appears to have been uploaded. In the majority of those instances, deposits were recorded as having been made via “Cash deposits” or “Admin Adjustments”. The Monitor also identified other instances where Account deposits were made through methods where supporting documentation should have been available, such as wire confirmation or e-transfers, but no supporting documentation was located in the Platform. As a result, it has not been possible for the Monitor to verify whether the deposits were actually made or to which TPP accounts funds were deposited. The Platform does not maintain supporting documentation or information for Fiat withdrawals. 20. Different TPPs provided different processing options for the Company. Certain TPPs were payment processing companies offering services to Quadriga pursuant to written agreements while other TPPs were simply independent contractors involved with Quadriga who agreed to use their personal or corporate bank accounts to process Quadriga transactions, often without any formal written agreement in place. The Monitor has also identified several personal bank accounts and credit card accounts in the name of Mr. Cotten or parties related to Mr. Cotten that were used by Quadriga for processing Fiat - 13 - transactions. The Platform does not appear to contain a comprehensive listing of all of the Fiat accounts utilized by Quadriga. Cryptocurrency Transactions 21. Users could also deposit, trade and withdraw Cryptocurrency through the Platform. For deposits, Users were provided a hot wallet address (the “User Wallet”) to send Cryptocurrency onto the Quadriga exchange. A User Wallet was typically (although not always) an address set up uniquely for a single User. Users did not control the private keys of the User Wallets. The individual User Wallets were provided solely to enable transfers from outside the Platform to the Platform in a way that inbound Cryptocurrency transactions could be associated with the appropriate User Account. The User Wallets were controlled by Quadriga and Cryptocurrency received through User Wallets were pooled by Quadriga and transferred out of the User Wallets. 22. Cryptocurrency deposits, once confirmed, were credited to the User Accounts. Quadriga maintained custody and control of the Cryptocurrency on behalf of the Users while their funds were on the Platform. Unlike Fiat transactions, User initiated Cryptocurrency transactions through the Platform (deposits/withdrawals) were processed automatically by the Platform subject to sufficient Cryptocurrency being available to complete a transaction. 23. The Platform recorded both the receiving wallet and the destination wallet details associated with all Cryptocurrency deposits and withdrawals in and out of the Platform. As such, it is possible to utilize these wallet details for individual Cryptocurrency transactions to independently verify the transfer of Cryptocurrency against public blockchain information. - 14 - 24. To a certain extent, Quadriga operated in a similar fashion to a traditional brokerage institution in that Users could view their individual Account holdings but User Fiat and Cryptocurrency assets were maintained in general pooled accounts pending future User transaction activity. As Quadriga hot wallet inventory levels increased, portions of the Cryptocurrency were reportedly transferred to cold wallets for safe storage. From the Monitor’s investigation to date, the Monitor understands that custody and control of the Cryptocurrency holdings, including the decision as to where to maintain Cryptocurrency reserves, was primarily determined by Mr. Cotten. 25. As set out in the Third Report of the Monitor, the Monitor’s investigation has revealed that Quadriga last used its designated bitcoin cold wallets in April 2018. Affected Users 26. The data within the Platform indicates that as at the Filing Date, approximately 76,000 Users were owed a combination of Fiat and Cryptocurrency by Quadriga. Account holdings reported within the Platform as at the Filing Date, in base currency and Canadian dollar equivalent values 1 translated as at the Filing Date are as follows: 1 Cryptocurrency to Canadian dollar values are based upon prices reported on the website - 15 - 27. The Canadian dollar equivalent value of Quadriga Fiat and Cryptocurrency obligations to Users reflected in Quadriga’s database as at the Filing Date totalled $74.1 million and $140.5 million respectively or $214.6 million in aggregate. These values differ from previously reported values as source code reports generated by Quadriga’s independent contractor have been refined during the CCAA proceedings. Recoveries To Date 28. As outlined in previous Reports of the Monitor, significant effort was required to identify TPPs that may have held Fiat as at the Filing Date and to effect the transfer of such Fiat from the TPPs to bank accounts established by the Monitor. Attached as Appendix “B” is the Monitor’s Final Statement of Receipts and Disbursements (the “SRD”) of the Disbursement Account reporting all banking transactions within the CCAA proceedings. 29. The Monitor has recovered Fiat totalling $31.5 million from various sources. Subsequent to the bankruptcy date, the Trustee has recovered an additional $0.5 million. The Trustee has identified and is pursuing the recovery of an additional approximately $900,000 from one of the TPPs as a result of its investigation and information obtained pursuant to earlier Orders of this Court. Other Fiat recoveries from TPPs who have not responded to the Monitor’s requests for information or various Court Orders will continue to be pursued by the Trustee. As and when additional potential TPPs are identified, the Trustee will pursue information and Quadriga Property from these parties. www.coingecko.com. - 16 - 30. The Monitor has also taken possession of or identified Cryptocurrency valued, in Canadian equivalent dollars as at the Filing Date, at approximately $1.0 million as follows: Bitcoin 61.33029548 Bitcoin Cash 33.31773499 Bitcoin Gold 2,661.91654095 Litecoin 851.72720131 Ethereum 960.36200048 Bitcoin in Quadriga Cold Wallets not currently accessible 104.3350822 31. Total Funds (Fiat and Cryptocurrency) realized by the Monitor/Trustee approximates $33.0 million. Actions taken to locate missing Account holdings are outlined in this Fifth Report. Recovery Efforts on Devices and Accessible Information 32. Quadriga represented itself as being one of Canada’s largest cryptocurrency exchanges serving over 360,000 registered Users. Notwithstanding the size of the operation in terms of transactional values and volumes processed, specifically during 2017 and 2018, Quadriga was effectively a small operation with what appears to be limited corporate infrastructure and limited controls in respect of its operations. The face of the Company and the controlling mind of the business appears to have been Mr. Cotten. To date, the Monitor has been unable to locate any corporate records, to the extent such records exist, other than the limited materials found on electronic devices controlled by Mr. Cotten, TPP service provider records and data contained within the Platform. The Monitor notes other parties may have been involved in working with Mr. Cotten in implementing the 2 As reported within the Monitor’s First Report, on February 6, 2019, Quadriga inadvertently transferred 104 bitcoins valued at approximately $468,675 to Quadriga cold wallets which the Company is currently unable to access. - 17 - arrangements described in this Report, however further information is required to identify others’ involvement with certainty. 33. Quadriga did not maintain physical servers to retain supporting documentation associated with the business in the form of historical report retention, correspondence files, e-mail servers or other business communications. The Monitor understands that multiple communication services, e-mail systems and chat services, including encrypted communication methods were used at various intervals by Mr. Cotten and Quadriga contractors for business correspondence. 34. The Monitor has taken physical possession of a number of known electronic devices used by Mr. Cotten. It is not clear if other devices were used by Mr. Cotten or other parties within Quadriga as logs or records of devices do not appear to have been maintained. In respect of the devices now in the Monitor’s possession, three of the electronic devices (a USB stick, large MacBook laptop computer and Mr. Cotten’s home computer) were found to be encrypted (the “Encrypted Devices”), and as such, their contents have not been accessed to date. The Monitor took forensic images of the large MacBook laptop computer and Mr. Cotten’s home computer. In addition, other unencrypted devices, including two cell phones and a small MacBook laptop computer (the “Unencrypted Devices”) have also been imaged. The Monitor has accessed the images of the Unencrypted Devices and a preliminary review of the data was conducted including efforts to locate potential passwords for the Encrypted Devices, access wallet information with respect to possible previously unidentified Cryptocurrency reserves and to review general communications and other file documents providing information in relation to Quadriga’s operations. - 18 - 35. The Monitor notes that after Mr. Cotten’s death but prior to the CCAA filing, different Company representatives and an external consultant engaged to locate missing Cryptocurrency had possession of the Unencrypted and Encrypted Devices. A limited inventory of Cryptocurrency was retrieved from the Unencrypted Devices, returned to the Company and used to fund User withdrawal requests prior to the Filing Date. 36. The external consultant prepared a report detailing his investigation efforts, a copy of which has been provided to and reviewed by the Monitor. 37. The Monitor was advised that Quadriga maintained a Fastmail account with email addresses for Mr. Cotten and all of the individuals that worked as independent contractors to Quadriga. The Monitor has been able to recover e-mails stored on Quadriga’s Fastmail account. The Monitor has also recovered certain text messages stored on Mr. Cotten’s Unencrypted Devices. 38. The Monitor understands that Mr. Cotten used a Gmail account and email address for communications related to Quadriga’s business. The Trustee is currently pursuing efforts to obtain access to these e-mail communications. Discussions with Google indicate that it may require the Trustee to obtain a court order in the United States of America. Additionally, the Monitor’s review of Mr. Cotten’s available email and text correspondence indicates that he may have used various encrypted text messaging services. To date, the Monitor has been unable to access any of these communications. 39. The Monitor reviewed text and e-mail threads from the accessible information which provided insights with respect to communication with TPPs and Fiat movements between entities including transfers to Mr. Cotten or entities related to him. - 19 - 40. As set out above, the Monitor has not been able to locate complete records or logs of devices or forms of electronic communications used by Mr. Cotten or others in their roles at Quadriga. The Monitor has identified numerous examples where Mr. Cotten requested that individuals he was communicating with through email or unencrypted text messaging transition communications from these unencrypted methods to encrypted texts, telegram or messaging methods. The reasons for the usage of different email accounts and encrypted messaging services remains unclear. Security of the Operating Platform and AWS Data 41. Pursuant to the terms of the Platform Access Order dated March 5, 2019, Amazon Web Services Inc. (“AWS”) was authorized and directed to grant the Monitor with full and complete access to all AWS accounts in the name of Gerald Cotten or the Applicants. The Monitor made arrangements with AWS to ensure the AWS accounts are maintained so that the Platform and the Users’ transaction details necessary to adjudicate claims within the Bankruptcy Proceedings may be preserved. This includes efforts to ensure that all material on the AWS servers that make up the Platform infrastructure and other digital assets located within the AWS accounts including backup copies of the Platform data, the Platform source code, documents, files and access logs are retained. 42. The AWS server architecture was complex in nature and involved a series of more than thirty (30) running servers. Quadriga backed up the Platform on an hourly basis and maintained copies of all backups within AWS. The Monitor undertook several activities to preserve the Platform data as follows: - 20 - (a) snapshots (backup copies) of identified storage devices (58 Volumes totalling approximately 7.4 Terabytes of data) associated with the Platform and servers were made and have been stored in a separate and isolated AWS environment only accessible to the Monitor; (b) other files and folders located within the AWS environment which include approximately seventy (70) terabytes of data were also isolated and preserved in the same environment; and (c) obtained access to cryptographic security keys used to provide interactive login access to the Platform back-end servers. 43. In addition to preserving the AWS servers and data within the Platform, the Monitor also sought control over the internet domain name “quadrigacx.com” by writing to the internet domain name registrar. The domain name is not registered to Quadriga, however, the registrar has been advised of these insolvency proceedings. Books and Records 44. The Monitor has been unable to locate any evidence to suggest that Quadriga maintained any traditional books or accounting records since at least 2016. There are no indications that the Company maintained a general ledger accounting system, nor has the Monitor located any evidence of the existence of any accounting reports or financial statements since 2016, Corporate tax returns were not prepared or filed with the Canada Revenue Agency (the “CRA”) and no HST filings were submitted. Quadriga engaged independent - 21 - consultants to assist with the operations, however, the Monitor has not located any records detailing the specific amounts paid to these independent consultants. 45. The Monitor has not located any documents that track operating expenses, including, independent contractor fees, TPP processing fees, third party exchange fees, server maintenance obligations, bank charges, communication services, marketing services, legal fees, compensation distributed to Mr. Cotten and others (either in the form of salary, dividends or otherwise) or taxes payable (if any). The Monitor understands that operating expenses were processed through Quadriga’s extensive TPP network which frequently involved paying these expenses out of accounts funded with deposits from Users. As described further in this Fifth Report, the Monitor has obtained access to certain TPP records and bank statements and analysis of this information by the Trustee is ongoing. Quadriga Operating Platform and Database 46. The Monitor obtained access to and control of the Platform and has been guided through its innerworkings by its architect and primary administrator. The Monitor understands the Platform evolved as Quadriga expanded from modest beginnings in 2015 serving a few thousand customers to a Platform managing over 360,000 customer profiles processing millions of transactions annually. The Platform has been internally developed primarily by a single individual, and so the system architecture has not been formally documented. The Monitor was granted administrative access rights to the Platform and is now able to review User specific transaction activities recorded within the Platform and the supporting documents in relation to system User transactions (both Fiat and Cryptocurrency). In - 22 - addition, the Monitor has been able to obtain a general understanding of how the system worked. 47. The User facing Platform was designed and operated as an effective tool to facilitate the service offerings provided by Quadriga (buying, selling and trading of Cryptocurrencies) and provided Users visibility into their respective Account holdings and transaction details. The Monitor reviewed various aspects of the Platform to understand how the system recorded customer information and maintained transaction support data. The Platform contains personal information and transaction support documentation on an individual User and transaction basis as described in this Fifth Report. 48. Generally, the Platform as an administrative tool to manage the Quadriga business lacks critical infrastructure and design in terms of: (a) Accounting and profitability analysis capabilities; (b) General ledger accounting and segregation of fund capabilities of total Fiat and Cryptocurrency holdings between User Funds and Quadriga Funds; (c) Information with respect to relevant TPPs, bank account or wallets where assets are held; (d) Asset tracking (Fiat and Cryptocurrency holdings) by TPP, bank account, wallet address or exchange location; and (e) General administrative or internal controls embedded within the Platform. - 23 - 49. The Platform has no reporting or accounting functionality. Although transaction fees are charged and recorded within the Platform on a transaction by transaction basis and User Account holdings are adjusted when fees were earned, the Platform does not generate reports aggregating revenues by period. Furthermore, the Monitor has been unable to locate evidence of Quadriga expenditures being recorded or tracked within the Platform or elsewhere. The Platform does not provide any visibility into whether Quadriga was operating profitably or not. It is unclear whether Quadriga had visibility into its financial position. 50. Users deposited Fiat and Cryptocurrency with Quadriga and their User Accounts were credited. Funds were maintained in TPP bank accounts or Quadriga pooled wallets. Quadriga then provided direction to TPPs with respect to the use or transfer of the Fiat. It is not clear however, that Quadriga maintained any current tracking with respect to the balance that should have been held by TPPs at any given point in time. With respect to Cryptocurrency, Quadriga was the custodian of the Cryptocurrency and controlled any transfers out of Quadriga wallets. 51. While Quadriga earned fees as a result of User transactions, the Monitor has not identified any detailed accounting of these fees or any process to transfer amounts relating to earned fees from TPP accounts containing User Funds to other accounts representing Quadriga Funds. There does not appear to have been any segregation of User Funds from Quadriga Funds. It appears that Quadriga accessed pooled Fiat in TPP accounts and Cryptocurrency holdings to fund its operations as required. Furthermore, the Monitor’s investigation revealed that Mr. Cotten periodically transferred significant Fiat and Cryptocurrency - 24 - outside of Quadriga. The Monitor has not located any accounting to support these transfers. 52. To date, the Monitor has not located any evidence to suggest that Quadriga had the ability to track and reconcile pooled Funds by TPP, bank account, wallet address or exchange. The Monitor anticipated that definitive and accessible lists of accounts or wallet addresses would have been maintained and regular reconciliations performed to properly account for all Funds. The Platform does not report total Funds available nor does it identify specific accounts (bank account or wallet addresses) where Funds should be stored and no reconciliation efforts appear to have been maintained by the Company. The Monitor has reviewed correspondence between Mr. Cotten and certain TPPs in which Mr. Cotten inquires as to the balance being held by the TPP at a point in time. This further suggests that no tracking or accounting of Funds held by Quadriga existed. 53. User Account obligations as at the Filing Date indicate Quadriga ought to have held $74.1 million and $140.5 million of Fiat and Cryptocurrency respectively. The Platform does not report and Quadriga does not track where these Funds, if they do exist, were to have been physically, or in the case of Cryptocurrency, digitally maintained. 54. The Monitor understands that historically, limited access rights to the Quadriga operating system were granted to various internal Quadriga personnel based on their respective roles and responsibilities within the organization. The Monitor understands that as at the Filing Date, Mr. Cotten and the independent contractor responsible for maintaining the Platform were the only two individuals with full administrative privileges to the Platform. - 25 - 55. The Platform is capable of and did in some instances track administrator activity. Activities of authorized administrators engaged by Quadriga to perform administrative functions such as Fiat deposit and withdrawal approvals or the establishment and approval of new Users to the Platform were tracked and recorded to maintain a record of which contractors approved or modified specific transactions within the Platform. 56. However, while standard access logs recorded certain administrator activity within the Platform, these access logs did not capture activity by those administrators with full administrative rights. As such, since Mr. Cotten had full access rights to the Platform, the system did not record Mr. Cotten’s activities within the site. The Monitor was advised that the decision not to record Mr. Cotten’s administrative activities was done at his request. The Monitor notes that access log tracking activity by all administrators, even those with the highest levels of access is a common and expected feature of any software application similar to the Platform. 57. The Monitor also notes that it does not appear that Quadriga had appropriate protocols in place with respect to safeguarding the location and accessibility of Cryptocurrency reserves and relevant passwords to access such reserves. Supplemental safeguard options including the use of a “dead-man switch” which would provide critical password information upon the death of a key principal of the organization. The Monitor is advised that Mr. Cotten indicated to family members that he had established a dead-man switch prior to his death. Family members were expecting to receive an email with critical Quadriga operating information within days of Mr. Cotten’s passing. Neither the Monitor nor others involved with the organization are aware of a dead-man switch email having been received. - 26 - KYC Requirements 58. Quadriga’s standard operating protocols did require Users to provide and management to retain Know Your Client (”KYC”) information for Users transacting in Fiat. Quadriga Users transacting only in Cryptocurrency were not required to produce KYC personal information. KYC information could be provided by producing Equifax verification, through in person Canada Post verification or by uploading specified personal information such as pictures of passports, drivers’ licenses and other personal identifying information. 59. The Monitor examined a small sample of User Account details as part of its investigation. KYC User information, where available, supplied to Quadriga has been saved directly within the Platform. The data is not masked in any way. Administrative access such as the access previously utilized by the independent consultants and Mr. Cotten and the access granted to the Monitor allows access to view KYC information for any User. Given the sensitivity of this personal information, the Monitor has restricted Platform access internally to a small number of Monitor / Trustee representatives who require access to the Platform to administer these proceedings. 60. In its sample User account review, the Monitor also attempted to note whether KYC support documents were consistently supplied. From the small sample, the Monitor notes that it appears that in general, the KYC requirements were followed but there are instances in which it was not. 61. Mr. Cotten’s administrative privileges permitted him to override the KYC requirements within the Platform. The Monitor understands that Mr. Cotten reportedly overrode the KYC proof of personal information requirement on various occasions to approve new - 27 - Users to the Platform who Mr. Cotten was familiar with. In addition, Mr. Cotten appears to have used his administrative privileges to create customer account profiles without KYC information within the Platform, as further described below. The Monitor has not attempted to confirm how many of the 363,000 Quadriga customers have KYC details. Blockchain Analysis 62. The Monitor was initially advised that Quadriga maintained minimal levels of Cryptocurrency within its hot wallets as Mr. Cotten reportedly moved most Cryptocurrency to cold wallet storage to protect Quadriga from hacking or virtual theft. As previously reported in the Monitor’s Third Report, six (6) bitcoin cold wallet addresses (the “Cold Wallets”) were disclosed and investigated. To date, cold wallets for any other forms of Cryptocurrency have not been identified to or by the Monitor. 63. Analysis of public blockchain records indicate the Cold Wallets had not been used since April 2018 other than to fund and receive bitcoin with a competitor exchange and that Cold Wallet holdings prior to April 2018 were inconsequential in relation to total User deposits. 64. The Monitor’s preliminary blockchain analysis indicates that instead of maintaining Cryptocurrency within Quadriga controlled cold wallets, large volumes of Cryptocurrency were transferred out of Quadriga controlled wallets to accounts at competitor exchanges maintained in Mr. Cotten’s personal name. 65. The Monitor has been able to obtain blockchain transaction details from two competitor exchanges with accounts held in the name of Mr. Cotten (the “Exchange Accounts”). One of the Exchange Account data sets is complete as it was received directly from the - 28 - Exchange. The other Exchange Account data set was indirectly received and appears to be primarily complete but is missing some transaction information. 66. The transactional analysis of the Exchange Accounts indicates the competitor exchanges received multiple forms of Cryptocurrency from Quadriga wallets from 2016 through 2019 including 9,450 bitcoin; 387,738 Ethereum and 239,020 Litecoin. Many of these holdings were converted into other Cryptocurrencies (primarily bitcoin). The conversion of User Cryptocurrency into other currencies through competitor exchanges resulted in incremental fees being incurred and currency exchange fluctuations relative to the original currency generating gains and losses. In addition, it appears that the activity in the Exchange Accounts resulted in overall trading losses. 67. The Monitor’s blockchain analysis did indicate that a portion of the Cryptocurrency holdings within the Exchange Accounts, after trading activity, was returned back to Quadriga. The Monitor also noted that of the remaining Cryptocurrency not returned to Quadriga, 5.6 bitcoin appear to have been transferred to wallet addresses which the Monitor understands to be controlled by Mr. Cotten. As well, approximately 1,426.2 bitcoin were transferred from the Exchange Accounts to wallet addresses in respect of which the Monitor has no information as to the beneficial owner or understands the beneficial owner to be a party other than Mr. Cotten. In addition, the Monitor also noted that smaller amounts of other forms of Cryptocurrency were transferred to Mr. Cotten’s wallets or wallets for which the beneficial owner was a third party or unknown person. As at the Filing Date neither of the Exchange Accounts held any Cryptocurrency. - 29 - 68. The Monitor also learned from one of the Exchanges that Mr. Cotten had established a margin account that traded various Cryptocurrencies extensively (67,000 individual transactions). The margin account trades involved multiple currencies including DASH, OMG, ZEC and DOGE among others which are not tradeable on Quadriga. The margin account trading activities were subject to substantial fees and generated substantial losses. As a result of the losses, the Exchange liquidated a significant portion of the Cryptocurrency in the account to satisfy the margin shortfall thereby reducing the net inventory of Cryptocurrency available to be returned to Quadriga. 69. The Monitor’s investigation identified a third Exchange Account (the “Third Exchange”) (an offshore exchange) used by Mr. Cotten. The Monitor has received transaction information relating to the Third Exchange from a Quadriga contractor. The information obtained does not include full account information and details regarding the originating wallet addresses of Cryptocurrency deposits and receiving location of fiat withdrawals. The Monitor understands that there are approximately eight (8) bitcoin currently maintained within the Third Exchange account. 70. Although the Monitor has corresponded with the Third Exchange to attempt to obtain full account details, the position of the Third Exchange has been that given its jurisdiction and regulatory requirements, it is unable to provide the Monitor with the transaction information or the remaining bitcoin. However, the Monitor has been advised that the Third Exchange has provided account details to local law enforcement authorities in the jurisdiction of the Third Exchange. Accordingly, the Trustee is attempting to recover the information through formal channels. - 30 - 71. The transaction information available to the Monitor with respect to the Third Exchange indicates that 21,501 bitcoin were deposited into the account in Mr. Cotten’s name. While the Monitor’s investigation suggests that at least some of the bitcoin originated from Quadriga, it is unclear whether all of the bitcoin originated from Quadriga given the lack of originating wallet information as set out above. 72. It appears that Mr. Cotten liquidated all of the bitcoin deposited in the account on the Third Exchange (except for eight (8) bitcoin) for the equivalent of approximately $80,000,000 Canadian dollars over the course of three years. To date, the Monitor has been unable to account for what happened to the proceeds of the sale of the Cryptocurrency through the Third Exchange. 73. The Third Exchange operates in a different manner than the Exchange Accounts in that the Third Exchange facilitates transactions between buyers and sellers allowing them to select their specific counterparty and utilizes an escrow feature to complete transactions rather than the Exchange taking custody of the transacting Funds. The Monitor has identified two specific trading partners within the Third Exchange who were the counterparties to significant transaction volume and value with Mr. Cotten. 74. The Trustee will continue to pursue information from external Exchanges and to review transactions involving the movement of Quadriga Cryptocurrency out of Quadriga wallets. Operational Issues 75. Prior to 2017, Quadriga operated as a modest start up cryptocurrency exchange platform with limited customers, revenues, operating protocols and systems. Quadriga’s operating - 31 - growth exploded in 2017 with expanding customer demand as market prices for many cryptocurrencies appreciated rapidly. 76. The Monitor has been advised that Quadriga struggled to keep up with operational demands both in terms of approving new customers onto the Platform and transactional processing. The limitations within the Platform infrastructure as set out above, including the lack of reporting capabilities, lack of accounting within the Platform and what appears to be ineffective controls were not addressed despite the significant growth in transaction volume and value. 77. Specific to Fiat processing, additional TPPs were engaged to assist Quadriga as volumes increased. The Monitor initially identified nine (9) TPPs involved with Quadriga. In addition, the Monitor has identified several bank accounts and other financial facilities in the names of Mr. Cotten, Ms. Robertson or corporations controlled by them that were also used to process Quadriga Fiat transactions. The Monitor estimates that more than forty (40) financial accounts have been used by or on behalf of Quadriga since inception. It appears that limited governance arrangements or contracts were implemented to ensure User Fiat was protected in the TPPs’ custody. Some of the TPPs engaged were offshore entities. 78. The use of TPPs resulted in significant TPP fees and expenses being incurred. For example, fees paid by Quadriga to only two (2) of its significant TPPs between 2017 and 2018 exceeded $11.8 million. 79. The Monitor understands that in general, financial institutions declined to open bank accounts for which the purpose was to receive and disburse funds connected to a - 32 - cryptocurrency business. In its investigation and review of text and email communications, the Monitor noted that certain TPPs were instructed by Mr. Cotten to provide limited information to the financial institutions in relation to the intended use of the account and its association with the cryptocurrency industry to limit scrutiny by the financial institutions. 80. The Monitor identified a number of accounts that were frozen or closed subsequent to the financial institution becoming aware of the nature of the underlying transactions. The Monitor’s investigation indicates that frequently, Quadriga’s approach to addressing financial institution queries into the nature of the account usage was often to simply move on to another financial institution to avoid further questioning. 81. The Monitor’s investigation also identified many “cash” transactions where certain Users repeatedly funded their Accounts with large cash deposits. The Monitor has been advised that this involved the User physically handing cash in the form of legal tender to a representative of Quadriga. As an example, the Platform recorded $12.1 million of “In person Payments” received from one User through a series of nineteen (19) cash transactions over a 5-month period. The Monitor has been unable to verify how or if these cash deposits were appropriately deposited into the Quadriga treasury system through TPP accounts or other accounts. The Monitor has also reviewed communications which appear to indicate that Mr. Cotten sometimes credited a User’s account with a deposit with the understanding that the User would deliver cash at some point in the future. The deposits, once credited to the User’s Account, were subsequently used by the User to trade and remove Cryptocurrency off Platform. The tracing of these cash deposits within the Quadriga treasury system remains an active item of investigation for the Trustee. - 33 - 82. The substantial volume of cash transactions recorded within the Platform which the Monitor has been unable to account for may account for a portion of the deficiency in Funds held by Quadriga as at the Filing Date relative to User Account balances. 83. As set out above, the Monitor has been unable to locate any accounting with respect to the pooled Quadriga Funds. The Monitor notes the TPP accounts were used to process User Fiat transactions, fund general Quadriga operating costs and on multiple occasions funds were directed to Mr. Cotten, parties related to Mr. Cotten or counsel/parties acting on his behalf. It appears that as and when operating expenses were required to be paid, or when Mr. Cotten desired funds to be transferred to himself or related parties, he simply instructed TPPs to issue payments with no oversight. 84. An analysis of Quadriga operating disbursements processed through the TPP accounts will be extremely difficult to isolate given the lack of books and records and the inability of the Monitor to obtain detailed transaction information from all TPPs or even identify a comprehensive list of TPPs. Outlined later in the Report is an overview of the efforts undertaken to obtain information and Quadriga Property from identified TPPs. Potentially Inappropriate Use of Affected Users’ Funds 85. The general framework of the Quadriga business was to offer a Platform where Users could facilitate Fiat and Cryptocurrency trades with funding they provided. It appears that use of Funds was directed by a single individual – Mr. Cotten. The Monitor has identified several instances in which Funds may have been used inappropriately including: - 34 - (a) using User Funds to discharge Quadriga operating costs without tracking whether sufficient fee revenue had been earned to support the payment of the operating costs or without visibility into whether sufficient Funds remained to support User Fiat balances; (b) accepting and crediting User Accounts with “cash deposits” without proper controls or accounting to ensure the Fiat deposits were appropriately deposited into TPP accounts; (c) use of Third Party external Exchanges to hold User Cryptocurrency; (d) conversion of Cryptocurrencies off Platform exposing Users to incremental fees and trading losses; (e) User Funds being used as security for margin accounts off Platform and made subject to trading losses and enforcement risks; (f) trading Unsupported Deposits (as defined later in this Report) for real Funds and generating artificial trading markets; (g) using currency conversion services to trade User Cryptocurrency holdings; and (h) transfer of Quadriga Funds to personal accounts and / or to fund personal assets. 86. There is no indication that the Users were aware that Funds were being utilized in this manner. - 35 - Gerald Cotten Platform Activities 87. As outlined in the Third Report of the Monitor, fourteen (14) Accounts were initially highlighted for the Monitor’s review and determined to be controlled by Mr. Cotten (the “Identified Accounts”). An analysis of the Platform revealed the Identified Accounts had no KYC information and were maintained under various pseudonyms (examples include Chris Markay, Aretwo Deetwo and Seethree Peaohh). Chris Markay Account 88. Approximately 95% of all Identified Account activity was processed through an Account in the name of Chris Markay. The Identified Accounts were credited with a significant amount of Funds (Fiat and Cryptocurrency) and used to transact with Users on the Platform and to transfer Funds out of Quadriga as described below. 89. The Chris Markay Account reported Fiat deposits exceeding $220 million and significant Cryptocurrency deposits including 34,806 bitcoin and 540,011 Ethereum onto the Platform between 2016 and 2018. Reported Fiat deposits include a single $100 million deposit in June 2017; a single $50 million deposit in January 2018 and a series of monthly deposits of approximately $10 million each between June and December 2018. 90. Although substantial Fiat deposits were reported there were no Fiat withdrawals recorded specifically from the Chris Markay Account other than a single $21,186 USD withdrawal made in 2015. 91. As discussed above, typically Users uploaded supporting documentation associated with User deposits including bank support materials or blockchain transaction detail as - 36 - applicable. However, in relation to the Chris Markay deposits referenced above only approximately 1% of the Fiat and Cryptocurrency deposits were supported by any documentation. The remaining deposit value appears to have no supporting documentation associated with it. To date, the Monitor has been unable to independently verify the deposits through blockchain analysis or review of TPP account statements accessed to date. As a result, the Monitor notes that it is likely that these deposits are not represented by actual Fiat or Cryptocurrency (the “Unsupported Deposits”). 92. Once “deposited”, the Unsupported Deposits were used to facilitate trades within the Platform and to withdraw real Cryptocurrency from Quadriga. Substantial trading activity was processed through the Identified Accounts which were counterparties to approximately 300,000 trades conducted on the Platform. This activity improved Platform trading volumes and generated additional fee revenue for Quadriga as an artificial market was established to provide bona fide Users a trading partner to complete requested transactions. Furthermore, as Users were trading real Funds for Unsupported Deposits their ability to withdraw Funds from Quadriga became subject to Quadriga’s reserve levels at the time the withdrawal request was made. 93. In addition to trades within the Quadriga Platform, the Monitor independently verified through blockchain analysis that large volumes of Cryptocurrency were withdrawn from Quadriga through the Chris Markay Account. It appears that although the Chris Markay Account may have been funded with Unsupported Deposits, real Cryptocurrency was transferred out. - 37 - 94. A summary of the Chris Markay Cryptocurrency withdrawal values by year and by currency follows: Currency 2016 2017 2018 Total Btc 6,753.11 4,972.48 6,087.54 17,813.13 Eth 402,749.17 602,482.22 68,573.33 1,073,804.72 Ltc - 25,298.93 165,365.67 190,664.60 Bch - 9,512.40 4,927.72 14,440.12 Btg - - 1,800.00 1,800.00 Etc 34,459.13 - - 34,459.13 95. The Monitor analyzed the detailed transaction withdrawal history from the Chris Markay Account consisting of more than 2,500 transactions. A significant number of these withdrawals appeared to have been sent to wallet addresses linked to the three (3) competitor exchanges described earlier in this Report, individuals that appear to have entered into transactions with Mr. Cotten personally, an exchange platform allowing users to exchange one cryptocurrency for another and at least one wallet address controlled by Mr. Cotten personally. In addition, a number of transfers were sent to wallet addresses where the beneficial owner of the wallet is currently unknown. 96. The Monitor notes that the preliminary Prospectus used by Quadriga when initially seeking to go public in 2015 did reference the concept of a margin account which as described was to be used to facilitate trades when the Platform was in its initial phases. The activities outlined above differ from this concept in inter alia structure, trading on versus off Platform, and volume, however the Monitor notes that there was some initial reference to the concept of internal trading accounts in the Company’s disclosure. - 38 - Transfer of Fiat from Quadriga 97. In addition to the transfer of Cryptocurrency out of Quadriga wallets, it appears that significant Fiat may have been transferred from TPP accounts for purposes other than funding User withdrawals. The Monitor has been unable to locate records in respect of fees or compensation paid to directors, officers or independent contractors and therefore has no ability to confirm the quantum of any compensation payable. The Monitor understands Mr. Cotten did not file personal tax returns for 2014, 2015 or 2017. Mr. Cotten did file personal tax returns in 2014 and 2016, however, no Quadriga income was claimed in these years. 98. In the course of its investigation, the Monitor identified significant transfers of Fiat from Quadriga to Mr. Cotten and his wife. The Monitor understands that in the last few years, Mr. Cotten and his wife, either personally or through corporations controlled by them acquired significant assets including real and personal property. The Monitor also understands that they frequently travelled to multiple vacation destinations often making use of private jet services. The Monitor has been advised that neither Mr. Cotten nor his wife had any material source of income other than funds received from Quadriga. 99. On April 11, 2019, this Court issued the Asset Preservation Order a copy of which is attached at Appendix “C”. Pursuant to this Order, Ms. Robertson in her personal capacity and as the executor of Mr. Cotten’s estate agreed to disclose all assets (the “Preserved Assets”) belonging to her, Mr. Cotten and any entities related to either one of them (the “Preserving Parties”). In addition, the Preserving Parties agreed that they were restrained from selling or disposing of the Preserved Assets subject to the consent of the Monitor. - 39 - 100. Ms. Robertson consented to the Asset Preservation Order and has been cooperating with the Monitor to identify, preserve and in certain instances liquidate the Preserved Assets, the net proceeds from which are being held in trust by counsel. The Trustee previously estimated the cumulative net realizable value of the Preserved Assets to be approximately $12.0 million. The composition of the identified Preserved Assets includes: (a) Real properties (16) in Nova Scotia; (b) Real property in British Columbia; (c) Investment securities; (d) Cash holdings; (e) Personal sailing vessel; (f) Personal aircraft; (g) Luxury vehicles; and (h) Gold and silver coins. 101. As Mr. Cotten’s and Ms. Robertson’s personal expenditures and the accumulation of their personal assets since 2015 was sourced from Quadriga funds, the Trustee intends to seek the recovery of the Preserved Assets subject to the Asset Preservation Order back to the Estate for immediate liquidation on the basis that the funds which Mr. Cotten directed be paid to them constitute preferences or transactions at under value under the BIA and may be subject to other causes of action asserted by the Trustee. If such actions are successful, the proceeds from such actions will be available for the Estates’ creditors. - 40 - Quadriga Profitability Comments 102. As the Company appears to have failed to maintain traditional books and accounting records, and produced no accounting reports or financial statements since 2015, the Monitor is unable to estimate the profitability of Quadriga. However, the Monitor has analyzed the limited information available and notes certain information below. 103. The Platform did not track operating costs, however, it does appear to track fee revenues charged on individual transactions. The Monitor notes that given the lack of reporting capability, the Monitor is unable to assess the reasonableness of these numbers. 104. Attached below is a summary of the Quadriga fee revenues reported within the Platform for the period 2014 through 2019 adjusted to remove fees earned on transactions processed through the Identified Accounts. Fiat fees (CDN and USD) have been adjusted to Canadian equivalent dollars and the Cryptocurrency fees are reported in the currency earned. Currency 2014 2015 2016 2017 2018 2019 Total Deposit Fees CDN $3,138 $46,500 $116,380 $5,677,680 $4,606,313 $29,822 $10,479,833 Withdrawal Fees CDN - $6,713 $109,085 $1,537,760 $2,402,319 $5,323 $4,061,200 Trade Fees CDN $13,304 $130,807 $286,168 $9,546,762 $8,396,152 $89,620 $18,462,813 $16,442 $184,020 $511,633 $16,762,202 $15,404,784 $124,765 $33,003,846 Currency 2014 2015 2016 2017 2018 2019 Total Trade Fees BTC 37 338 344 870 429 12 2,030 ETH 1,564 9,618 3,050 131 14,363 LTC 6,640 4,393 119 11,152 BCH 587 206 10 803 BTG 156 469 48 673 BSG 25 5 30 - 41 - 105. It appears that Quadriga generated modest revenues between 2014 and 2016. The popularity of Cryptocurrency and the commodity value appreciation served as a catalyst for Quadriga’s rapid revenue growth and the fees earned in 2017 and 2018. 106. Although operating expenses appear not to have been tracked or accounted for the Monitor has been able to identify a series of obligations incurred or costs which the organization would likely have funded including: (a) TPP fees ($11.8 million paid to two TPPs between 2017 and 2018); the quantum paid to other TPPs is unknown; (b) Ethereum Classic splitter contract loss of 67,000 etherium (approximately $13 million at the time of the loss) associated with an Ethereum Classic splitter contract in 2017); (c) Operating costs including legal fees, independent contractor fees, general operating costs including technology services and AWS server fees and corporate taxes (if applicable) although not filed; (d) Amounts paid or transferred to Mr. Cotten or Ms. Robertson and related entities; (e) Fees and trading losses associated with Cryptocurrency transferred to external Exchanges including Cryptocurrency transition sites; and (f) Fees and trading losses associated with margin accounts. 107. It is possible that the above obligations or costs exceeded the fee revenue earned by Quadriga and resulted in a deficiency in Funds held on behalf of Users. In addition, the - 42 - freezing of Fiat through the CIBC Interpleader Motion described in the Initial Affidavit and First Report created additional liquidity issues, impacting Quadriga’s ability to fund withdrawal requests from Users. Next Steps in the Investigation 108. During the course of its review, the Monitor has attempted to identify other potential explanations for the potentially inappropriate use of Affected Users’ Funds as set out above. The Monitor notes that in some circumstances, Funds transferred from TPP accounts or Quadriga wallets have been returned in part. However, the Monitor is unable to confirm the return of all of the transferred Funds. 109. The Trustee will continue to attempt to accumulate and review additional information as it is obtained to continue with the investigation commenced by the Monitor, and continue with its asset identification and recovery efforts, including seeking to examine various parties through the Trustee’s examination rights under the BIA. 110. The Monitor cautions that given the nature of the blockchain and cryptocurrency industry including the privacy and confidentiality features that attract investors to the industry the nature of the information available and the traceability of reserves and assets will be challenging. However, the Trustee’s efforts to seek to identify and recover available assets for ultimate distribution to the affected Users is ongoing as described herein. 111. Should the Trustee determine it necessary to pursue additional litigation or proceedings to pursue recovery, it will report further and seek authorization in accordance with the BIA. - 43 - THIRD PARTY PROCESSORS UPDATE 112. As discussed above, Quadriga used TPPs to receive, hold and disburse User Fiat on behalf of Quadriga. The Monitor has taken various steps in these CCAA proceedings to recover Fiat, account statements and other records from TPPs regarding funds processed on behalf of Quadriga through these accounts. Initial efforts in this regard are described in the Fourth Report of the Monitor dated April 1, 2019 (the “Fourth Report”). 113. On April 11, 2019, the Court issued an Order (the “TPP Order”) directing certain TPPs to deliver information and property of the Applicants with respect to funds processed by the TPPs. A copy of the TPP Order is attached as Appendix “D”. The Court adjourned part of the motion with respect to relief sought by the Monitor against Costodian Inc. (“Costodian”) and BillerFY Labs Inc. On April 18, 2019, the Court issued a subsequent Order (the “Second TPP Order” and together with the TPP Order, the “TPP Orders”) directing Costodian, BillerFY Labs Inc., ePADregistry Inc., Armourga Financial Group Corp. and Interbank Smart Ledger Consortium Corp. (collectively, the “Reyes Companies”) to deliver records regarding property that the Reyes Companies held to the Monitor, including account statements in respect of bank accounts that hold or held Quadriga Fiat. The Court also ordered the Reyes Companies and POSConnect Inc. (“POSConnect”) to deliver any property of the Applicants in their possession to the Monitor. A copy of the Second TPP Order is attached as Appendix “E”. 114. An update with respect to TPP recovery efforts since the Fourth Report follows. - 44 - Vopay International Inc. 115. In accordance with the TPP Order, Vopay International Inc. (“Vopay”) transferred $116,262.17 to the Monitor representing the only remaining property of the Applicants that Vopay claimed to be holding. 1009926 B.C. Ltd. 116. 1009926 B.C. Ltd. (“B.C. Ltd.”) is a company controlled by a Quadriga contractor, which acted as a TPP on behalf of the Applicants. Prior to the CCAA proceedings, B.C. Ltd. received and attempted to assign and deliver approximately 1,004 bank drafts (the “Bulk Drafts”) which it held on behalf of Quadriga. The Bulk Drafts were not deposited prior to the Filing Date, however as previously reported, additional steps were taken in consultation with B.C. Ltd and the Royal Bank of Canada, which permitted the Monitor to deposit the Bulk Drafts, though there were certain exceptions including several Bulk Drafts that were stale-dated and subject to recourse. The Monitor is currently reviewing the rejected Bulk Drafts to determine next steps regarding these drafts and the implications on any User claims. 117. Following the issuance of the TPP Order, B.C. Ltd. also delivered various bank statements to the Trustee relating to accounts used to process funds on behalf of Quadriga. Information provided indicates throughout the course of its relationship with Quadriga, B.C. Ltd. opened accounts with 14 different financial institutions to receive and disburse funds on behalf of Quadriga. The Trustee is reviewing the statements to determine if there is any relevant information to its investigation in the statements. - 45 - 118. In addition to the statements and the Bulk Drafts, B.C. Ltd. delivered additional funds totaling $473,458.19 (the “Additional Funds”) that remained in its possession including additional bank drafts in respect of deposits made by Affected Users or residual funds on hand within certain of the 14 accounts noted above. Similar to the Bulk Drafts, some of the additional bank drafts delivered by B.C. Ltd. were stale dated and may be subject to recourse. The Additional Funds have been deposited within the 0984750 B.C. Ltd. bankruptcy account and accordingly are not reflected within Appendix “B”. WB21/Black BanX 119. As described in the Fourth Report, Quadriga maintained a Canadian and U.S. dollar account with an organization doing business as WB21 (n/k/a Black BanX) (“WB21/Black BanX”). As of the Filing Date, the Applicants believed WB21/Black BanX was holding approximately $8,991,911.77 and US$2,360,755.53 on behalf of Quadriga. WB21/Black BanX (Singapore) claimed it was holding only $11.77 and US$5.53 on behalf of Quadriga and that WB21/Black BanX (Canada) was not involved with Quadriga. WB21/Black BanX has refused to provide any supporting documentation to the Monitor or Trustee, including account statements, accounting records, or agreements between Quadriga and WB21/Black Bank to substantiate its claim. 120. Pursuant to the terms of the TPP Order, Black Banx Inc., the Canadian affiliate of WB21/Black BanX, and WB21 Pte. Ltd., the Singapore affiliate of the organization, were ordered to deliver various documents to the Monitor regarding property which the companies held or previously held on behalf of Quadriga. The Court also ordered that WB21/Black BanX deliver any remaining property of the Applicants that they were - 46 - holding (including property they admitted to hold) to the Monitor. Notwithstanding the terms of the TPP Order and the Trustee’s demands for delivery of the property and information set out in the TPP Order WB21/Black BanX has not responded. 121. Through the course of its investigation, the Monitor has also become aware that User Fiat was deposited with additional companies affiliated with WB21/Black BanX, including WB21 GmBH (Germany), WB21 LLC (Georgia), and WB21 Ltd. (Germany). WB21/Black BanX and its affiliates held bank accounts at various institutions in Europe which received Fiat directly from Users. The Trustee is considering possible steps that could be taken against WB21/Black BanX and may take further action if determined to be viable and beneficial to the Quadriga estate. Alto Bureau de Change 122. As set out in the Fourth Report, the Monitor believed that 9133-8079 Quebec Inc. (d/b/a Alto Bureau de Change) (“Alto”) was holding $20,876.78 - $36,212.97 of Quadriga funds in relation to a series of transactions completed late in 2018. Pursuant to the terms of the TPP Order, Alto was directed to deliver any Quadria property in its possession to the Monitor within 10 days of the TPP Order. The Monitor has demanded the return of such property from Alto. In response, Alto has made various allegations regarding the historical conduct of Quadriga and denies that it is holding any Quadriga property. The Trustee will review potential next steps against Alto with the Estate Inspectors within the bankruptcy process. - 47 - Reyes Companies 123. Each of the Reyes Companies acted as TPPs on behalf of Quadriga. Pursuant to the terms of the Second TPP Order, the Reyes Companies were directed to deliver certain information and documentation to the Monitor along with any property of Quadriga remaining in their possession within 10 days of the Second TPP Order. 124. Annual transaction ledgers of the receipts and disbursements made through the Reyes Companies bank accounts between 2017 and 2019 have been produced. However, the Reyes Companies did not deliver bank statements supporting the ledger entries as required by the Second TPP Order. It appears Quadriga Fiat was not segregated as required and was co-mingled with funds of other customers of the Reyes Companies. The Trustee will continue to work to obtain the isolated banking information with respect to the Quadriga Fiat from the Reyes Companies. 125. Information produced indicates the Reyes Companies received and disbursed approximately $262 million on behalf of Quadriga through the course of the parties’ threeyear relationship and that the Reyes Companies were holding residual funds totalling $462,502.11. The Reyes Companies have agreed to return the residual funds to the Trustee. 126. In addition to the residual funds discovered by the Trustee, the Reyes Companies appear to have deducted fees totalling $398,350.41 to release the bank drafts to the Monitor associated with the CIBC litigation and also deducted the personal funds that the Monitor repaid to Mr. Reyes. There remains a dispute between Mr. Reyes and the Trustee as to whether the fee amounts have been returned to the Trustee as part of the previous transfers. - 48 - The Trustee and counsel are pursuing this issue with counsel for the Reyes Companies to resolve the dispute. 127. The Trustee may return to Court in the Bankruptcy Proceedings to seek relief against the Reyes Companies if the issues cannot be resolved consensually. POSConnect 128. POSConnect was ordered to provide the Monitor with access to Quadriga’s online account with POSConnect to obtain documents and accounting records and also ordered to deliver the remaining property of Quadriga held by POSConnect to the Monitor. The Monitor has obtained access to Quadriga’s online account. The account provides statements of receipts and disbursements made by POSConnect on behalf of Quadriga but contains limited details regarding individual transactions, including identities of persons depositing and receiving funds into the account. The statements within the account show that POSConnect received approximately $480 million on behalf of Quadriga during their two-year relationship and disbursed approximately the same amount, less fees of approximately $4.2 million. 129. The balance remaining in Quadriga’s account with POSConnect was $281,338.12 as at the date the Monitor obtained access to the account. These funds were returned to the Monitor less amounts which POSConnect deducted for fees and expenses totalling approximately $28,000 less a small reserve for future fees. POSConnect claims that both amounts are payable under the Custody of Funds and Payment Services Agreement between Quadriga and POSConnect dated May 2, 2017. The Trustee is reviewing the agreement to determine whether it is entitled to such fees and whether such fees are reasonable in the circumstances. - 49 - All of which is respectfully submitted this 19th day of June 2019. ERNST & YOUNG INC. In its capacity as the Court-appointed Monitor in the matter of the proposed compromise and arrangement of Quadriga Fintech Solutions Corp., Whiteside Capital Corporation and 0984750 B.C. Ltd. George Kinsman CPA, CA, CIRP, LIT Senior Vice President Appendix A Appendix B District of Nova Scotia Division No. 01-Halifax Court No. 484742 Estate No. 0000414-2019-NS RECEIPTS Third Party Payment (Custodian) 25,272,089.09 Bulk Draft Deposits 5,463,586.93 Third Party Payment (Credit Union) 254,180.23 Third Party Payment (POSCONNECT Inc.) 252,608.25 Interim Financing 150,000.00 Third Party Payment (VoPay International) 116,262.17 Interest 90,822.99 Third Party Payment (700964 NB Inc.) 5,000.00 TOTAL RECEIPTS $ 31,604,549.66 DISBURSEMENTS Transfer to Bankruptcy Account (0984750 BC Ltd.) 27,494,191.26 Legal Fees - Monitor 851,776.31 Transfer to Separate Account (Disputed Amount) 778,213.94 Monitor Fees 676,908.61 Legal Fees - Applicant 454,950.46 Legal Fees - Rep Counsel 388,282.12 HST Paid (ITC) 355,644.77 Transfer to Bankruptcy Account (Fintech) 254,180.23 Independent Contractors 127,802.78 Computer Services 62,041.39 Jose Reyes Personal Funds 60,958.64 Media Services 35,165.22 Chief Restructuring Officer Fees 30,105.33 Transfer to Whiteside (Third Party Deposit) 25,000.00 Advertising 8,689.97 Other Miscellaneous Disbursements 316.95 PST Paid 210.18 Bank Charges 111.50 TOTAL DISBURSEMENTS $ 31,604,549.66 Amount Available for Distribution $ - Notes Ernst & Young Inc. Licensed Insolvency Trustee Per: __________________________________________ George Kinsman RBC Waterside Centre 1871 Hollis St., Suite 500 Halifax, NS B3J 0C3 IN THE MATTER OF THE PLAN OF ARRANGEMENT OF QUADRIGA FINTECH SOLUTIONS CORP., WHITESIDE CAPITAL CORPORATION AND 0984750 BC LTD. FINAL STATEMENT OF RECEIPTS AND DISBURSEMENTS FOR THE PERIOD 05 FEBRUARY 2019 TO 07 JUNE 2019 Appendix C SUPRiME COURT OF NOVA SCOTIA APR 112919 2019 HfrNoAS4742 L HALIFAX, N.S. JN THE SUPREME COURT OF NOVA SCOTIA IN THE MATTER OF: Application by Quadriga Fintech Solutions Corp., Whiteside Capital Corporation and 0984750 B.C. Ltd. dlb/a Quadriga CX and Quadriga Coin Exchange (collectively referred to as the “Companies” and the “Applicants”), for relief under the Companies’ Creditors Arrangement Act / ORDER I / (Asset Preservation Order) //t4 BEFORE THE HONOURABLE JUSTICE MICHAEL J. WOOD UPON MOTION, in the proceedings of Quadriga Fintech Solutions Corp., Whiteside Capital Corporation, and 0984750 B.C. Ltd. dba Quadriga CX and Quadriga Coin Exchange (collectively, the “Applicants”), under the Companies’ Creditors Arrangement Act (the “CCAA Proceedings”), by Ernst & Young Inc. (“EY”), in its capacity as Court-appointed Monitor and/or trustee-in-banicuptcy of the Applicants in respect of any proceedings under the Ban&uptcy and Insolvency Act (Canada) (the “Monitor”); UPON READING the Fourth Report of the Monitor dated April 1, 2019 and on being advised by counsel that the Preserving Parties have consented to the terms hereof; AND UPON HEARING counsel to the Preserving Parties (as herein defined), counsel for the Monitor, Representative Counsel of the Affected Users (“Representative Counsel”), counsel to Jennifer Robertson and such other individuals who appeared and were heard on the Motion; IT IS HEREBY ORDERED AND DECLARED THAT: Preservation Order 1. Except as specifically authorized by this Order, pending thrther Order of this Court, Jennifer Robertson as executor of the estate of Gerald Conen (the “Estate”), Jennifer Robertson (“Robertson”), Robertson Nova Consulting Inc. (“RNC”), Robertson Nova Property Management Inc. (“RNPM”). 2379164 Ontario Inc. (“237 Inc.”), Megacorp Incorporated (“Megacorp”) and Jennifer Robertson as Trustee of The Seaglass Trust (“Seaglass” and together with the Estate, Robertson, RNC, RNPM, 237 Inc. and Megacorp., the “Preserving Parties”) and their respective servants, employees, agents, assigns, officers, directors, trustees, and anyone else acting on their behalf or in - conjunction with any of them, and any and all persons with notice of this injunction, are restrained from directly or indirectly, by any means whatsoever: (a) selling, removing, dissipating, alienating, transferring, assigning, encumbering, or similarly dealing with any assets or property of the Preserving Parties, wherever situate; (b) instructing, requesting, counselling, demanding, or encouraging any other person to do so; and (c) facilitating, assisting in, aiding, abetting, or participating in any acts the effect of which is to do so. 2. Paragraph 1 applies to all of the Preserving Parties’ assets whether or not they are in the names of the respective parties and whether they are solely or jointly or beneficially owned, including, without limitation, assets of the Estate (the “Estate Assets”), assets of RNC, assets of RNPM (collectively, “Corporate Assets”) and assets of Jennifer Robertson personally andlor held through Seaglass (the “Personal Assets” and together with the Estate Assets and Corporate Assets, the “Preserved Assets”). For the purpose of this Order, the Preserving Parties’ assets include any asset which any of the Preserving Parties has the power, directly or indirectly, to dispose of or deal with as if it were their own. The Preserving Parties are to be regarded as having such power if a third party holds or controls the assets in accordance with these parties’ direct or indirect instructions. 3. Three trust accounts are to be established and maintained by Stewart McKelvey for each of the Estate Assets, Corporate Assets and Personal Assets (collectively the ‘Preservation Accounts”) for the exclusive purposes of collecting and preserving: (a) surplus hinds from current Estate Assets, Personal Assets and Corporate Assets, as determined by consultation between the Monitor and the Preserving Parties or as determined by further Order of the Court; (b) proceeds arising from any dispositions of assets of the Preserving Parties with the Monitor’s consent in accordance with this Order; and (c) excess working capital assets, if any, of RNPM at year end. For greater certainty the Preservation Accounts shall not form part of the Applicants’ Property pending further Order of the Court, if necessary. 4. Stewart McKelvey may distribute fhnds from the Preservation Accounts in accordance with the terms of this Order, with the consent of the Monitor or further Order of this Court. 5. The Preserving Parties may deal with, sell, alienate, transfer, assign, encumber, or otherwise monetize Estate Assets, Corporate Assets or Personal Assets only with the consent of the Monitor, or further Court Order, provided that any net proceeds arising from such disposition of assets by the Preserving Parties shaLl be deposited into the respective Preservation Accounts. 6. The Monitor and Preserving Parties are authorized to identify and monetize any assets which may depreciate in value if not monetized during the term of this Order. The -3- Preserving Parties shall have no liability if assets of a depreciating or volatile nature decline in value while the subject of this Order. 7. This Order shall be without prejudice to each of the Applicants and Preserving Parties’ respective rights, entitlements, claims and defences in respect of ownership or entitlement to the Preserved Assets. Ordinan Living Expenses and Legal Expenses and Property Preservation Expenses 8. Robertson shall continue to receive her drawings from RNPM in accordance with current levels, for the purposes of satisfying ordinary living expenses. In addition, Robertson shall be entitled to access cash from the Personal Assets for purposes of satisfying property preservation and maintenance costs of the Personal Assets, in an amount to be agreed upon in consultation with the Monitor and satisfied through disbursement from the Preservation Account for Personal Assets established in accordance with paragraph 3 of this Order. 9. Reasonable costs of legal advice and representation of the Preserving Parties shall be paid from the respective Preservation Accounts. 10. Robertson shall be entitled to direct RNPM to utilize its cash or further income from the Corporate Assets for the purposes of satising reasonable corporate expenses of RNPM including in respect of property preservation and maintenance expenses, and reasonable general operating costs of RNPM (“Property Preservation Expenses”) in accordance with past practices. RNPM will continue to be managed in the normal course of business, including the incurring and payment of Property Preservation Expenses and reasonable salary/payments as determined in consultation with the Monitor or further Order of the Court, but no special distributions by way of dividends, bonus or extraordinary salary shall be paid to Robertson or any other party. RNPM shall not be entitled to encumber any of its property without the prior written consent of the Monitor. For greater certainty, any net rental or investment income earned by RNPM shall remain in the corporate bank accounts of RNPM and be used to satisfy Property Preservation Expenses, subject to the terms of this Order. 11. Where additional funds are required by the Preserving Parties above the amounts contemplated in paragraphs 8 - 10 of this Order, the Preserving Parties or any of them may seek the written consent of the Monitor andlor apply for an Order of the Court, on at least seventy-two (72) hours notice to the Monitor seeking authorization to receive additional amounts of the Preserved Assets from the applicable Preservation Account that the Preserving Party may be entitled to receive in respect of costs to be incurred by the applicable Preserving Party. Disclosure of Information 12. To the extent not provided to the Monitor prior to the date of this Order, Robertson shall prepare and provide to the Monitor, within ten (10) days of the date of this Order: (a) a sworn statement describing the nature, value, and location of the assets worldwide of the Preserving Parties, including cash on hand balances wherever situated, whether in their -4- respective names or not and whether solely or jointly or beneficially owned; (b) answers to any outstanding questions from the Monitor’s letters to RNC, Robertson and the Estate dated February 22, 2019 and February 25, 2019; and (c) copies of Robertson’s personal income tax return, and the income tax return for each of RNC, RNPM. and Seaglass, for the past three (3) years. Third Parties 13. Royal Bank of Canada, TD Bank Group, The Bank of Nova Scotia (“BNS”), BMO Financial Group, Canadian Imperial Bank of Commerce, Canadian Tire Bank, Canadian Western Bank, East Coast Credit Union, Questrade Financial Group Inc. and Manulife Financial Corporation (collectively, the “Banks”) to forthwith freeze and prevent any removal or transfer of monies or assets of the Preserving Parties held in any account or on credit on behalf of the Preserving Parties with the Banks, except as outlined pursuant to the terms of this Order, in particular transfers to the Preservation Accounts contemplated by paragraph 3 of this Order and disbursements made from the accounts in paragraph 14 of this Order, or with a written direction from the Monitor and the applicable Preserving Party, or further Order of the Court. 14. One (1) personal bank account and one (1) corporate bank account with BNS shall be maintained as primary bank accounts for Jennifer Robertson and RNPM, respectively, for purpose of ongoing disbursements for ongoing living expenses for Jennifer Robertson and Property Preservation Expenses as contemplated in this Order. For greater certainty, the Monitor shall have access to account statements and information in respect of such accounts on an ongoing basis for reporting purposes, and BNS shall provide such information and documentation to the Monitor in accordance with paragraph 15 of this Order. 15. The Preserving Parties consent to all Banks holding assets of the Preserving Parties or which formerly held assets of the Preserving Parties, in any account or on credit on behalf of the Preserving Parties to disclosure and delivery to the Monitor by the Banks of any and all records and statements held by the Banks concerning the Preserving Parties’ assets and accounts, including the existence, nature, value and location of any monies or assets or credit, wherever situate, including all records and statements held by the Banks concerning any assets and accounts of the Preserving Parties formerly held by the Banks, and the Banks shall forthwith provide such information and documentation to the Monitor. Cryptocurrency 16. All cryptocurrency exchanges, including the cryptocurrency exchanges doing business as Binance, Bitfinex, Bitmex, Bitstwnp, Coinbase, Digifinex, EzBtc.ca, Huobi, Kraken, Localbitcoins.com, Poloniex, OkCoins, OkEx and Shapeshift, (the “Exchanges”) to forthwith freeze and prevent any removal or transfer of currency or assets of the Preserving Parties held in any account or on credit on behalf of the Preserving Parties, with the Exchanges, except as outlined pursuant to the terms of this Order, or with a written direction of the Monitor and the applicable Preserving Party, or firther Order of the Court. 17. The Preserving Parties consent to all Exchanges holding assets of the Preserving Parties or which formerly held assets of the Exchanges, in any account or on credit on behalf of the Preserving Parties to disclosure and delivery to the Monitor by the Exchanges of any and all records and statements held by the Exchanges concerning the Preserving Parties’ assets and accounts, including the existence, nature, value and location of any monies or assets or credit, wherever situate, including all records and statements held by the Exchanges concerning any assets and accounts of the Preserving Parties formerly held by the Exchanges, and the Exchanges shall forthwith provide such information and documentation to the Monitor. 8. Any cryptocurrency accounts determined to be held in the name of any of the Preserving Parties on any Exchanges, shall be returned to the Monitor to form pan of the Applicants’ property. Any Exchanges holding cryptocurrency on behalf of any of the Preserving Parties shall be entitled to rely on the directions of the Monitor in respect of the transfer of such assets. Sate of Assets 19. Where assets have been monetized in accordance with the terms of this Order and with the written approval of the Monitor and Representative Counsel, the Applicants’ and Affected Users release all claims as against title to the assets sold to a bonafide third party purchaser (the “Purchased Assets”). For the purposes of determining the nature and priority of any claims as against any Purchased Assets, the net proceeds from the sale of the Purchased Assets shall stand in the place and stead of the Purchased Assets, with the same priority as they had with respect to the Purchased Assets immediately prior to the sale, as if the Purchased Assets had not been sold. Variation, Discharge or Extension of Order 20. Anyone served with or notified of this Order may apply to the Court at any time to vary or discharge this Order on notice to the Monitor and the Preserving Parties in accordance with the applicable rule under the Nova Scotia Civil Procedure Rules. General 21. The aid and recognition of any court, tribunal, regulatory or administrative body having jurisdiction outside Nova Scotia is requested to give effect to this Order and to assist the Monitor, the Preserving Parties and their respective agents in carrying out the terms of this Order. All courts, tribunals, regulatory and administrative bodies are hereby respectfully requested to make such orders and to provide such assistance to the Monitor, as an officer of this Court, and the Preserving Parties and their respective agents as may be necessary or desirable to give effect to this Order, or to assist the Monitor, Preserving Parties and their respective agents in carrying out the terms of this Order. -6- Issued at Halifax, Province of Nova Scotia, this \t”dayofAprj!, 2019. AWBOLDT Deputy prothonotalV -7- CONSENTED To; Richard Niedermayer, on behalf of each of the Preserving Parties Stewart McKelvey Purdys Wharf Tower One 1959 Upper Water Street Suite 900 Halifax, NS BJJ 3N2 Direct: 902-420-3339 Email: miedermayer(stewartmcke1vey.com Counsel to Jennifer Robertson, in her personal capacity, as Executor of the Estate of Gerald Cotten, and as Trustee of The Seaglass Trust, Robertson Nova Consulting Inc., Robertson Nova Property Management Inc., 2379164 Ontario Inc., and Megaeorp Incorporated 1018B0243 v3 Appendix D -SUPREME OURT OF NOVA SCOTIA APR112049 2019 HfxNo.484742 HALIFAX, N.S. IN THE SUPREME COURT OF NOVA SCOTIA IN THE MATTER OF: Application by Quadriga Fintech Solutions Corp., Whiteside Capital Corporation and 0984750 B.C. Ltd. d’b/a Quadriga CX and Quadriga Coin Exchange (collectively, the “Applicants”), for relief under the Companies’ Creditors Arrangement Act ORDER (Re Third Party Payment Processors) 41/ BEFORE THE HONOURABLE JUSTiCE MICHAEL J. WOOD J. . UPON MOTION, in the proceedings . of Quadriga ..Frncech Solutions Corp., Whiteside Capita! Corporation, and 0984750 B.C. Ltd. dba Quaddga CX and Quadriga Coin Exchange (collectively, the “Applicants”), under the Companies’ Creditors Arrangement Act (the “CCAA Proceedings”) by Ernst & Young Inc. (“EY”), in its capacity as Court-appointed Monitor and/or trustee-in-bankruptcy of the Applicants in respect of any proceedings under the Bankruptcy and Insolvency Act (Canada) (the “Monitor”); UPON READING the Fourth Report of the Monitor dated April 1,2019; AND UPON HEARING counsel to the Applicants, counsel for the Monitor, Representative Counsel of the Affected Users and such other individuals who appeared and were heard on the Motion; IT IS HEREBY ORDERED AND DECLARED THAT: I. If necessary, the service of the Notice of Motion, the Motion Record and supporting documents are hereby abridged and service is hereby deemed adequate notice so that the Motion is properly returnable today and thflher service thereof is hereby dispensed with. Vopay International 2. Within ten (10) business days of this Order, Vopay International Inc. shall deliver Si 16,262.17 to the Monitor. Alto Bureau de Change 3. Within ten (10) business days of this Order, 9133-8079 Quebec Inc. (d/b/a Alto Bureau de Change) (“Alto”) shall deliver any assets, undertakings or property of the Applicants (the “Property”) in the possession of Alto to the Monitor. 1009926 B.C. Ltd 4. Within ten (10) business days of the Order, 1009926 B.C. Ltd (“B.C. Ltd”) shall deliver copies of all books, documents, and accounting records, and any other papers, records and information related to Property that B.C. Ltd holds or previously held, including account statements in respect of bank accounts that hold or held Property, deposit and withdraw transaction information related to the Property that B.C. Ltd holds or held, the identities of depositors of Property and recipients of Property that B.C. Ltd holds or held, directions received by B.C. Ltd from the Applicants in respect of distributions of Property and other information and documents reasonably required to ascertain the location of the Applicants’ Property. 5. Within ten (10) business days of the Order. B.C. Ltd shall deliver any Property in the possession of B.C. Ltd to the Monitor. POSConnect 6. POSConnect shall provide access to the online Quadriga account with POSConnect (the “POSConnect Account”). Mr. George Kinsman of EY (“Kinsman”) is authorized and permitted to access the POSConnect Account on behalf of the Monitor to obtain any documents, and accounting records, and any records and information related to Property thai POSConnect holds or previously held located within the POSConneci Account, and POSConnect shall have no liability or obligation to any party in respect of any actions taken or omissions made arising from Kinsman’s or the Monitor’s access to the POSConnect Account. WB2 1 7. WB2I Ne. Ltd. and Black Banx Inc. (collectively, “WB21”) shaLL forthwith deliver all books, documents, and accounting records, and any other papers, records and information related to any accounts that hold or held Property, including account statements in respect of CAD account #19033 19383 and USD account #19033 19384, deposit and withdraw transaction information in respect of such accounts, the identities of depositors into such accounts and recipients of Property from such accounts, and other information and documents reasonably required to ascertain the location of the Applicants’ Property. 8. Within ten (10) business days of the Order, WB2I shall deliver any Property in the possession of W82 I to the Monitor. General 9. Any dispute regarding the amount of Property held by Alto and WB2I shall be determined by this Court on a motion returnable on at least seven (7) days’ notice to the applicable parties in respect of the dispute. 10. All of the terms of this Order shall continue to apply in any proceedings in respect of the Applicants under the Bankruptcy and Insolvency Act (Canada) ,niitat/s ,nutandis. 11. The aid and recognition of any court, tribunal, regulatory or administrative body having jurisdiction outside of Nova Scotia, including the United States or Singapore, is requested to give effect to this Order and to assist the Applicants, the Monitor and their respective agents in carrying out the terms of this Order. All courts, tribunals, regulatory and administrative bodies are hereby respectfully requested to make such orders and to provide such assistance to the Applicants and the Monitor, as an officer of this Court, as may be necessary or desirable to give effect to this Order, or to assist the Applicants and the Monitor and their respective agents in carrying out the terms of this Order. 12. This Order and all of its provisions are effective as of 12:01 am. Atlantic Standard Time on the 8 day of April, 2019. Issued at Halifax, Province of Nova Scotia, this jj day of April, 2019. AMANDA HAWBOLOT Deputy Prothonotary 109572034 vI Appendix E SUPREME CURT1 OF NOVA SCOTIA I APR1 82019 2019 I HEx No. 484742 LFAx, ía IN THE SUPREME COURT OF NOVA SCOTIA IN THE MATTER OF: Application by Quadriga Fintech SoLutions Corp., Whitcside Capital Corporation and 0984750 B.C. Ltd. d/b/a Quadriga CX and Quadriga Coin Exchange (collectively, the “Applicants”), for relief under the C’o,npanies Creditors Arrangement Act ORDER / (Re Third Party Payment Processors — POS Connect Inc., Costodian Inc., BillerFY Labs Inc., ePADregistry Inc., POSConnect Inc., Armourga Financial Group Corp. and Interbank Smart Ledger Consortium Corp.) /9/ BEFORE THE HONOURABLE CHIEF JUSTICE MICHAEL J. WOOD UPON MOTION, in the proceedings of Quadriga Fintech Solutions Corp., Whiteside Capital Corporation, and 0984750 B.C. Ltd. dba Quadriga CX and Quadriga Coin Exchange (collectively, the “Applicants”), under the Canipwnes Creditors Arrangement Act (the “CCAA Proceedings”) by Ernst & Young Inc. (“EY”), in its capacity as Court-appointed Monitor and/or trustee-in-bankruptcy of the Applicants in respect of any proceedings under the Bankruptcy and Insolvency Act (Canada) (the “Monitor”); UPON READING the Fourth Report of the Monitor dated April 1, 2019; AND UPON HEARING counsel to the Applicants, counsel for the Monitor, Representative Counsel of the Affected Users and such other individuals who appeared and were heard on the Motion; IT IS HEREBY ORDERED AND DECLARED THAT: I. If necessary, the service of the Notice of Motion, the Motion Record and supporting documents are hereby abridged and service is hereby deemed adequate notice so that the Motion is properly returnable today and farther service thereof is hereby dispensed with. 2. Costodian Inc. (“Costodian”), BillerFY Labs Inc. (“BilIerFY”), ePADregistry Inc. (“ePAD”), Armourga Financial Group Corp. (“Armourga”) and Interbank Smart Ledger Consortium Corp. (“Interbank”) shall forthwith deliver copies of all books, documents, and accounting records, and any other papers, records and information related to Property that Costodian. BillerFY, ePAD, Armourga or Interbank hold or previously held, including account statements in respect of bank accounts that hold or held Property, deposit and withdraw transaction information related to the Property that Costodian, BillerFY, ePAD, Armourga or Interbank hold or held, the identities of depositors of Property and recipients of Property that Costodian, BiflerFY. ePAD, AnEourga or Interbank hold or held, directions received by Costodian, BillerFY, ePAD, Armourga and/or Interbank from the Applicants in respect of distribution of Property and other information and documents reasonably required to ascertain the location of the Applicants’ Property. 3. Within ten (10) business days of the Order, POSConnect Inc. (“POSConnect”), Costodian. BillerFY, ePAD. Armourga and Interbank shall deliver any Property in the possession of Costodian, BillerFY, ePAD, Armourga or Interbank to the Monitor. General 4. Any dispute regarding the amount of Property held by Costodian, BiILerFY. ePAD, Armourga, Interbank and POSConnect shall be determined by this Court on a motion returnable on at least seven (7) days’ notice to the applicable parties in respect of the dispute. 5. All of the terms of this Order shall continue to apply in any proceedings in respect of the Applicants under the Bankruptcy and Insolvency Act (Canada) mutatis mutandis. 6. The aid and recognition of any court, tribunal, regulatory or administrative body having jurisdiction outside of Nova Scotia, including the United States or Singapore, is requested to give effect to this Order and to assist the Applicants, the Monitor and their respective agents in carrying out the terms of this Order. All courts, tribunals, regulatory and administrative bodies are hereby respectThlly requested to make such orders and to provide such assistance to the Applicants and the Monitor, as an officer of this Court, as may be necessary or desirable to give effect to this Order, or to assist the Applicants and the Monitor and their respective agents in carrying out the tenTis of this Order. 7. This Order and all of its provisions are effective as of 12:0 1 a.m. Atlantic Standard Time on the lS day of ApriL, 2019. Issued at Halifax, Province of Nova Scotia, this j.. day of April, 2019. tWBOLDT Deputy Prothonotary 109572034 vl4