Last month, it was reported that Quadrigacx has been unable to access 28 million Canadian dollars ($21.6M USD) since January after CIBC froze multiple bank accounts owned by the exchange’s payment processor, Costodian Inc., and its owner, Jose Reyes. CIBC reportedly froze the accounts after it was unable to identify the owner of the funds held in the accounts.
Quadrigacx accused CIBC of seeking ways to further prolong the holding of these funds while trying to rationalize an act which should not have happened in the first place. In response, CIBC filed application for an interpleader order seeking to pay the funds into court so that the 388 depositors may be put on notice and the entitlement to the disputed funds can be resolved.
CIBC said that it is entitled to an interpleader order because it has no beneficial interest in the disputed funds and there is a real foundation for the expectation of competing claims for the funds.
Ontario Superior Court Judge Glenn Hainey ruled in favor of CIBC, saying that the bank has met the onus of establishing that there is a real foundation for the expectation of competing claims with respect to the disputed funds. Hainey ordered CIBC to pay the disputed funds to the accountant of the Superior Court to await the outcome of a proceeding to determine entitlement to the funds.
Hainey made the ruling after Quadriga CEO Gerald Cotton and Reyes both testified that the online wallets of each of the depositors have been credited with QuadrigaCX Bucks in the amounts of their deposits to the transaction account. However, Reyes admitted on his cross-examination that he relied solely on information he received from Cotton to make this assertion. When Cotton was cross-examined he refused to confirm his evidence.
“In my view, this was a highly relevant question with respect to whether there is the foundation for an expectation that there will be competing claims to the disputed funds by the depositors,” Hainey said. “Cotton’s refusal to answer the question leads me to draw an adverse inference that depositors have not been credited with QuadrigaCX Bucks in their online wallets. There is, therefore, a real possibility that they will make claims with respect to the disputed funds.”
Regarding Quadrigacx’s allegation that CIBC wrongfully froze the accounts, Hainey said that he is “not in a position on this record to make any determination as to CIBC’s possible liability for doing so.”
“Accordingly, it would be inappropriate for me to extinguish any liability that CIBC may have for freezing the accounts in the absence of an evidentiary record that establishes that CIBC has no liability,” Hainey said.