From Recognition to Recovery: Appointment of Receiver for Centralized Asset Recovery Process in Cross-Border Insolvency Proceedings

In the foreign recognition proceedings of Mirror Trading International (Pty) Ltd (Re), 2026 ABKB 293, the Alberta Court of King Bench recently appointed a receiver to facilitate foreign liquidators running a claims process to recover funds from “net winners” of a Ponzi-type scheme located in several different provinces in Canada. The decision illustrates a powerful tool available in cross-border insolvency proceedings to recover assets located in Canada. The appointment of a receiver to run a centralized claims process to recover assets may be useful where:

• assets are held by individuals located in multiple provinces; and/or
• the recovery of those assets may involve the determination of common issues,

as the “single control” model of insolvency proceedings in Canada allows these claims to be pursued in a single coordinated process, avoid inter-provincial jurisdictional disputes, and obtain a single threshold determination on any common issues. Foreign insolvency practitioners should consider utilizing this powerful tool in appropriate circumstances going forward to improve the speed, efficiency and coordination of asset recovery in Canada.

Background

• Mirror Trading International (Pty) Ltd (“MTI”) was subject to winding-up and liquidation proceedings in the High Court of South Africa (“Foreign Proceedings”).
• MTI was the centre of a Ponzi-type scheme, where investors paid Bitcoin in return for the promise of unrealistic returns (the “Scheme”).
• In May 2023, the Foreign Proceedings were recognized in Canada under the Bankruptcy and Insolvency Act (“BIA”) as “foreign main proceedings”. The Court (i) granted stays in favour of MTI and its property, (ii) ordered that the liquidators in the Foreign Proceedings (the “Liquidators”) were entrusted with the administration and realization of all MTI’s property in Canada, and (iii) permitted certain South African-appointed commissioners to examine MTI’s investors residing in Canada (a power which did not end up being used).
• The Liquidators sought to recover funds received by the “net winners” of the Scheme (those that received more than they invested), and initially commenced 19 separate civil actions in Alberta against 31 individuals residing in several different provinces (the “Clawback Actions”).
• The Clawback Actions were slow and disjointed in advancing. Some defendants had yet to be served. Some default judgments were issued and some settlements obtained. Some defendants in other provinces challenged the jurisdiction of the Alberta court, at least one of which was successful. The Liquidators sought a ruling from the Alberta court that it had jurisdiction to adjudicate all of the claims, which was denied due to lack of evidence to undertake the necessary jurisdictional analysis.
• Evidently fed up with the jurisdictional snags and slow pace of the civil actions, the Liquidators brought an application to appoint a receiver over MTI to run a claims process to recover funds from “net winners” of the Scheme.

Single Proceeding Model in Insolvency Proceedings

Insolvency proceedings in Canada under the BIA and Companies’ Creditors Arrangement Act (“CCAA”) utilize a “single proceeding” or “single control” model to facilitate the orderly and efficient administration of the debtor’s estate.^[1] The single proceeding model is typically described as a “shield” in the form of a stay of proceedings that requires all claims against the debtor to be pursued in a centralized claims process under a single supervising court. However, the single proceeding model is increasingly being utilized as a “sword” to funnel claims by the debtor – which outside of insolvency should presumptively be pursued in the jurisdictions where the defendants reside and/or to which the disputes are connected – into a single forum.^[2]

Courts have held that the benefits of the orderly and efficient administration of estates generally outweigh the inconvenience in having to bring or defend claims in another jurisdiction unless the person is a “stranger to the bankruptcy”. The increased use of virtual hearings and electronic records has undoubtedly impacted this calculus by making it easier to participate in court proceedings in other jurisdictions.

Clawback Claims Processes in Domestic Insolvency Proceedings

In a Ponzi scheme, payment of purported returns to investors come from funds contributed by new investors.^[3] There are generally “net winners” (who receive more than their investment amount), “net losers” (that lose part of their investment) and “losers” (that lose their investment entirely). Canadian law provides several causes of action that may be relied upon to claw back payments from “net winners” and even some “net losers”, including the preference provision in the BIA (which also is available in CCAA proceedings), the provincial Fraudulent Conveyances Acts and unjust enrichment, among others.

In previous domestic insolvency proceedings in My Mortgage Auction Corp and Grozelle, courts have approved centralized claims processes for bankruptcy trustees to recover proceeds from “net winners” in Ponzi schemes, noting that while the trustee could commence separate actions against each of them (as the Liquidators initially did in this case), that would likely lead to significant delays, inefficiencies and exorbitant costs.^[4] These claims processes had two phases:

• Phase 1 – Determining Liability: this common issue phase consists of adjudicating whether payments made to investors generally constituted fraudulent conveyances, unjust enrichments, etc. that would constitute such payment being void and of no effect, on a summary basis; and
• Phase 2 – Confirmation of the Claim Amounts: this individual judgment phase determines whether each investor was a “net winner” or not, and if so by how much, and the issuance of money judgments to pay (with an opportunity for parties to dispute the clawback calculation, to make potential set-off claims, and to possibly consolidate claims to determine who was a “net winner”).

Extended to Cross-Border Proceedings in MTI

The BIA and CCAA provide a recognized foreign representative the ability to seek relief from the Court, including the appointment of interim receivers.^[5] The Court has the power to grant an order appointing a receiver and can direct the receiver to take possession of all or a part of the debtor’s property specified in the appointment.^[6]

The Court in MTI concluded that the appointment of a receiver to run a centralized claims process similar to My Mortgage Auction Corp and Grozelle was appropriate, even in the context of an ancillary foreign recognition proceeding. The centralized claims process “would be more efficient, could be completed much sooner likely at less cost, and could be equitable and fair so as to allow Defendants to raise their substantive positions”, and would “simplify enforcement of the end result of the process.”^[7]

The Court stayed the Clawback Actions and authorized the receiver to develop and propose a centralized claims process. The Court found that the claims process that had been developed at that point lacked enough detail to allow it to be approved at that hearing and directed that the details be further fleshed out.^[8]

The decision in MTI illustrates that where a foreign debtor seeks to recover assets or pursue claims in Canada, especially where they involve individuals in multiple provinces and/or require the determination of common issues, they should consider seeking recognition of those foreign insolvency proceedings and the appointment of a receiver in Canada to run a centralized claims process before a single supervising court to facilitate the efficient recovery of assets.

^[1] Sam Lévy & Associés Inc. v. Azco Mining Inc., 2001 SCC 92 at para. 76; Peace River Hydro Partners v. Petrowest Corp., 2022 SCC 41 at paras. 54-55.

^[2] See e.g. Mundo Media Ltd. (Re), 2022 ONCA 607 at para. 52; Alderbridge Way GP Ltd. (Re), 2023 BCSC 1718 at paras. 46-56.

^[3] Mirror Trading International (Pty) Ltd (Re), 2026 ABKB 293 at paras 51-52 [MTI].

^[4] My Mortgage Auction Corp (Re), 2025 BCSC 1520; In the Matter of the Bankruptcy of Douglas Grozelle, 2026 ONSC 758.

^[5] Bankruptcy and Insolvency Act, RSC 1985 C. B-3, ss. 272, 274.

^[6] MTI at para 33.

^[7] MTI at paras. 123-124.

^[8] MTI at paras 139-140.