Court Takes Control of Funds Amid Crypto Exchange's Banking Dispute

Judge Glenn Hainey of the Ontario Superior Court of Justice granted the Canadian Imperial Bank of Commerce an interpleader order on Nov. 9, allowing the court to take control of the funds until their ownership can be established.

The bank will maintain liability for the funds, given that CIBC froze the funds on its own initiative.

In this case, there was a dispute about which party has a right to about $26 million CAD and $69,000 USD that the CIBC froze after questioning whether QuadrigaCX, its payment processor, Costodian, and Costodian director Jose Reyes were entitled to the funds.

CIBC will now be required to transfer the funds to the court until it can establish ownership among the claimants.

"The Court holds the disputed funds in trust only until the entitlement to the funds has been lawfully determined and competing claims are resolved," Duhaime, who is not involved in the case, explained.

"The next step is that CIBC will transfer the disputed funds into the Court's account and then the parties, including the customers of Quadriga who bought digital currencies with them during the time in question, can make an application for the return of funds that they believe are theirs. That includes Quadriga, who can bring an application to claim the funds."

"The Court holds the disputed funds in trust only until the entitlement to the funds has been lawfully determined and competing claims are resolved," she added.

The judge did not rule on whether CIBC froze the funds wrongfully or not.

The good news for QuadrigaCX customers is they can now apply to have their funds released by the court, she said.

Banks typically do not hold on to funds in the event of a de-risking action by anti-money laundering specialists, as that would require banks to keep the "High-risk account" open.