The B.C. Director of Civil Forfeiture has filed a court application to compel alleged co-founder of Quadriga Fintech Solutions Michael Patryn to explain how he obtained $250,200, 45 gold bars and various pieces of jewelry, which were seized from a 91原创 bank on June 18, 2021.
This is the director’s third unexplained wealth order application, according to a statement from the Minister of Public Safety and Solicitor General Mike Farnworth.
Quadriga was a cryptocurrency exchange that collapsed and filed for creditor protection on Feb. 5, 2019 with more than 76,000 clients owed $215 million, according to findings from the , which determined now deceased co-founder Gerald Cotten committed fraud.
On June 13, 2023, the director filed a forfeiture claim against assets belonging to Patryn.
Aside from the cash and gold bars seized by RCMP from a CIBC safety deposit box, police also took watches and jewelry. Of the gold bars, three were one-kilogram bars, now valued at close to $100,000 each.
“The Money was bundled or packaged in a manner not consistent with standard banking practices,” the claim asserts.
The claim alleges Patryn was a co-founder of Quadriga CX and/or Quadriga Coin Exchange, which conducted business via 0984750 B.C. Ltd.
According to the claim, in January 2019, the RCMP commenced an investigation into Quadriga for fraud and determined that M. Patryn and G. Cotten: conducted unauthorized trades; altered, falsified, or omitted documents and records relating to customer accounts; and took possession of customer assets held by Quadriga for their own personal use and financial gain, including the safety deposit box items.
In response to the initial claim, via lawyer Alison Latimer, Patryn asserted he is the owner of the money, gold and jewelry but denies it is the proceeds of crime nor used to engage in unlawful activity. He also denied being the co-founder of Quadriga.
Patryn also claimed in his Oct. 13, 2023 response that a police investigation against him breached his Charter rights and as such “seeks exclusion of all evidence obtained by the RCMP or other police forces.”
Now, the director’s new application for an unexplained wealth order includes more detailed allegations, including alleged chat records between Cotten and Patryn showing they “discussed hacking and stealing from” Quadriga.
“If the plan is to burn QCX. We are stealing the funds and burning the brand. Why not sell some of the brand? Free money,” Patryn allegedly wrote to Cotten.
The two allegedly discussed appropriating funds from the company as early as 2014: “Should we have a separate company we hire like a PR company or something we own,” Cotten allegedly wrote to Patryn, to which Patryn allegedly replied:
“To steal from the company? Yeah, but we shouldn’t go too crazy with that right now. I’m thinking we wait 3-4m. With the check swaps and advisory agreements etc, we’ve got so many that it could look suspicious early on. For check swap, Bridgemark charged us a $50k bonus, and then $5k per month for one year, paid upfront. Was worded that way, they got $110k for “Consultation services” for one year. Upfront.”
The director asserts that “overall, the Chat Records show: M. Patryn was heavily involved in all aspects of Quadriga’s operation.”
And, based on the forgoing, the director “suspects that M. Patryn directly or indirectly engaged in the Unlawful Activity.”
And, there is a “serious question to be tried” as to whether the assets were acquired as a result of unlawful activity.
The claim states that the Civil Forfeiture Act provides for unexplained wealth orders if, as determined by a judge, the director has “reasonable grounds to suspect that a defendant directly or indirectly engaged in unlawful activity.”
The standard of unlawful activity “does not require a prima facie threshold be met but does require something beyond mere subjective suspicion.”
And “the test for ‘reason to believe’ echoes that of ‘reasonable grounds to suspect,’ albeit with an even lower threshold.”
The claim notes that interpretation of a “serious question to be tried” has yet to be interpreted in the context of an unexplained wealth order application.
On March 26, a new 60-day interim preservation order was issued for the assets by B.C. Supreme Court Justice Jasmin Ahmad, who determined there is a serious question to be tried with respect to whether the assets were derived from unlawful activity.
The director had sought the order after the Crown and RCMP did not seek to renew the initial detention order (from Ontario) to retain the assets.
Via counsel Michael Gismondi for Peck and Company, Patryn suggested, among other objections, “that the Crown's decision not to seek a further extension of the [detention order] in Ontario is a good indication of its view of Mr. Patryn's alleged unlawful conduct.”
While Ahmad noted the Ontario Securities Commission (OSC) report does not expressly attribute any fraudulent conduct to Patryn, Ahmad said there was no indication the OSC had access to the chat records, which, according to the director “generally disclose, among other things, Mr. Patryn's early involvement and participation in Quadriga's operations.”
Regarding the UWO claim, and given its novelty to date, Farnworth issued a statement Wednesday:
"The international, criminal actions of Quadriga Coin Exchange (Quadriga CX) led to thousands of people losing their life savings. The fact that this organization has been the subject of a Netflix documentary related to a high-profile cryptocurrency fraud shows that these types of crimes do not show respect for borders. Only strong enforcement that undermines the profit motive will have an impact on such criminal organizations.
"The Quadriga CX case was also profiled by Law and Order Toronto: Criminal Intent in a February 2024 episode, The Key to the Castle. While the fallout of cryptocurrency theft that leaves many victims in its wake is topical, what is even more timely is the recovery of these ill-gotten funds and converting them to community benefits in a public way.
"Gold bars may be highly liquid and flashy luxury goods, such as jewelry and Rolex watches, attract attention, but they are also attracting the attention of police and our government. If they are the proceeds of criminal activity like fraud, drug trafficking or money laundering, we will go after them.
"We will continue to take the assets from unlawful activity and redirect the proceeds of crime to much-needed victim services programs and crime prevention initiatives, such as the anti-hate grants to communities announced on Feb. 15, 2024."
Editor's note: This article was updated March 27 with information about the interim preservation order ruling.
