PACE Securities Corp., a subsidiary of PACE Savings & Credit Union Ltd. (the "Credit Union") which operates as an Ontario Securities Commission regulated investment fund manager and dealer regulated by the Investment Industry Regulatory Organization of Canada (“IIROC”), was placed in liquidation on May 14. In 2018, the Credit Union was placed under the administration of the Financial Services Regulatory Authority after financial irregularities were uncovered. On May 21, the IIROC suspended the company from its membership. EY was appointed liquidator. Goodmans is counsel to the company.
Mill Street and Co. Inc., a Thornhill, Ontario-based privately-owned diversified investment company, was placed in receivership on May 12 on application by Crown Capital Private Credit Fund, by its general partner, Crown Capital Private Credit Management Inc., owed approximately $10.7 million. The company has a long history of defaulting on its credit agreement with Crown Capital, and Crown alleges that the defaults have been increasing in severity over time. Noah Murad, the company's sole director and officer, has denied these defaults and even threatened Crown Capital with legal action. With Mr. Murad’s promise of an immediate buyout of Crown Capital's position being unfulfilled, negotiations in respect of an amendment to the credit agreement not yielding any results, and the company continuing to default under the credit agreement, Crown Capital has completely lost confidence in the company and Mr. Murad. Farber was appointed receiver. Counsel is Aird & Berlis for the applicant and Kramer Simaan Dhillon for the company.
EncoreFX, a Victoria, British Columbia-based foreign exchange firm, filed for bankruptcy on March 30. After suspending its trading activities, the company advised clients that the restructuring had become necessary as a number of customers to whom the company granted credit defaulted on their obligations to the company because of the rapid changes in the FX market caused by COVID-19. Most of the company’s clients were importers and exporters doing $10.0 million to $50.0 million in FX transactions a year. EY is the bankruptcy trustee.
Gozco, a Calgary, Alberta-based investment firm, filed for bankruptcy in March 2018. PwC was appointed trustee. George Gosbee, who passed away in November 2017, was the company's sole director, officer, and shareholder. Karen Gosbee, his spouse, is the personal representative of Mr. Gosbee's estate. On January 7, PwC filed an application for an order declaring, amongst other things, that certain transactions granted by the company in favour of BNS (collectively, the "BNS Transaction") constitute a transfer at undervalue and are void as against the trustee. Bowfort, the company's primary creditor, had provided to the company a loan of USD $5.0 million secured by a promissory note dated January 2014. This loan was advanced to the company to assist in funding its USD $7.5 million investment in a US business venture. The company did not make any repayments of the loan to Bowfort other than certain baseline annual interest payments. On August 10, 2017, the Gosbees entered into a commitment letter with BNS to open a private and personal overdraft lending account. At their direction, the company completed a series of transfers whereby USD $750.0 thousand belonging to the company was transferred into this personal account, to the detriment of the company's creditors. At the time the BNS Transaction was completed, the company was insolvent. It is alleged that there was no valid business purpose for the company entering the BNS Transaction, and by doing so, it breached its obligation to Bowfort. PwC alleges that the BNS Transaction was intended to defraud, delay, or hinder the company's creditors. Bennett Jones is counsel to the applicant.
Dion Global Solutions (Canada), the Canadian branch of a global financial technology company based in India, filed for bankruptcy on December 30, listing $4.5 million in liabilities, including $3.2 million to FTI Consulting Hong Kong and $1.3 million to FTI Consulting Singapore. Farber is the bankruptcy trustee.
Einstein Exchange, a Vancouver, British Columbia-based cryptocurrency exchange with customer deposits equivalent to over $16.3 million, was placed in interim receivership on November 1 on application by the British Columbia Securities Commission. After receiving multiple complaints from members of the public claiming that they could not access their funds from Einstein, as well as complaints about improper use of funds and potential money laundering, the Commission issued an investigation order in May 2019. As part of the investigation, on October 31 the Commission demanded that Einstein, through its counsel, provide information about where its cryptocurrencies are stored. Two hours later, Einstein's counsel notified the Commission that it was no longer representing the company. The next day, the Commission visited Einstein's office and discovered that the elevator was locked for all floors. A phone call to the number listed on the company's website's stated that all its agents were unavailable. An interim receivership order was therefore immediately sought to preserve and protect the cryptocurrency and other assets of or held by the company. Grant Thornton was appointed interim receiver. Lawson Lundell is counsel for the applicant.
PrimeWest Mortgage Investment Corporation, a Saskatoon, Saskatchewan-based secondary lender, was placed in voluntary liquidation on October 31. Following the replacement of key personnel in 2016, the company conducted an in-depth review of, among other things, its mortgage portfolio, the results of which necessitated increases to its loan loss provisions and, ultimately, a restatement of its 2014 and 2015 financial statements. The company attempted to mitigate its mortgage portfolio losses in 2017 through a number of initiatives but was unable to return the company to profitability. Potential sales were also explored but no bona fide offers were received. The board and management therefore determined that a court-supervised liquidation was the best available option for winding up the corporation's affairs and returning any remaining capital to the shareholders. KPMG was appointed liquidator. McDougall Gauley is counsel for the company.
Besco International Investment, a Richmond, British Columbia-based company that owns a 25-acre property in Port Hope, Ontario, had its property placed in receivership on March 18 on application by Weichang Yang, owed approximately $3.6MM. The company is a guarantor of Huigang Sun's obligations to Yang. In May 2017, Yang advanced the equivalent of $5.0MM (CAD) in Chinese currency to Sun. Contrary to their oral agreement, Sun failed to provide Yang with the agreed amount of Canadian currency in return. Although Sun eventually repaid some amounts to Yang, he did not have the funds to pay the remaining balance owing; as such, the parties agreed to extend the maturity date of the loan. As part of the negotiation of this loan agreement, the company and Yang entered into a guarantee agreement. The company's obligations are secured by a general security agreement ("GSA"), which granted Yang the right to appoint a receiver over the company's assets and property upon a default under the GSA. KSV Advisory was appointed receiver. Counsel is Fasken for the applicant, Rebecca Huang & Associates for the company and DLA Piper for the receiver.
Westpoint Capital, an Edmonton, Alberta-based investment fund manager that manages a portfolio of Canadian real estate, was placed in interim receivership on March 13 on application by Westpoint Investment Trust by its Trustees, Munir Virani and Marnie Kiel. BDO was appointed interim receiver. Counsel is DLA Piper for the applicant and Miller Thomson for the interim receiver.
Quadriga Fintech Solutions, a Vancouver, British Columbia-based company that operates an online cryptocurrency exchange platform (the "QCX Platform"), filed for protection under the CCAA on February 5, owing over $260.0MM to certain of its users. The QCX Platform was launched in December 2013 and is used to facilitate the purchase and sale of cryptocurrencies for the company's 363,000 registered users. A user who wants to transfer bitcoin or other cryptocurrency requires a wallet. A wallet has an address to each user and is comparable to a piggybank that is located on a user's phone or computer. Wallets are described as either hot or cold. A hot wallet is located on a server and is used for transactions that require a quicker turnaround. A cold wallet or cold storage is located offline and is a safe space to secure coins. Any coins credited to a user on the platform were stored by Quadriga, either in a hot or cold wallet. Only a minimal amount of coins were kept on the server in a hot wallet. The normal procedure was to move the coins to a cold storage as a way to protect the coins from hacking or other virtual theft. The company cites several factors for its financial difficulties and current liquidity crisis. First, the company notes that it was never able to obtain a corporate bank account because the banks did not want to deal with it because of the cryptocurrency business. The company therefore had to use personal bank accounts and third party payment processors. In January 2018, CIBC froze an account that held approximately $25.7MM being held on Quidriga's behalf. The funds were paid into court and eventually released, but Quadriga has been unable to find a banking institution to accept the bank drafts. More recently, in December 2018, Gerry Cotten, Quadriga's founder and sole officer and director, passed away unexpectedly at the age of 30 while in India. Gerry ran the business through his laptop, which is encrypted and password protected. To date, and despite many expert attempts, no one has been been able to hack into the computer. Of critical concern is that an estimated $180.0MM of coins which Gerry moved to cold storage will essentially be lost, as Gerry alone held the security keys for the location of the cold wallets. The decision to enter bankruptcy protection was made to allow the company breathing room to investigate whatever stores of cryptocurrency may be available and negotiate the bank drafts available to the company. The proceedings will also stay any potential legal actions that users may have commenced had they been unable to access their funds. The company is also exploring the potential sale of its operating platform, which may have significant value and could lead to value being realized for the benefit of the company's creditors. EY was appointed monitor. Counsel is Stikeman Elliot for the monitor and Stewart McKelvey for the company. Several firms are vying for the role of representative counsel for the platform's users.