Australian Crypto Exchange Digital Surge Saves After $1.25 Million Loan From Lenders | Cryptocurrencies

A Brisbane-based cryptocurrency exchange will continue operations after creditors agree to a long-term plan by administrators to keep the business going as it tries to recover from FTX’s global meltdown.

Digital Surge went into receivership in December of last year following the company’s transfer of $33 million in assets to the global FTX platform just two weeks before the company’s spectacular collapse in November.

In a report released last week by administrators KordaMentha – which also runs FTX’s Australian administration – it was revealed that Digital Surge had 22,545 customers with more than $0.01 cents in their account at the time the company went into effect. administration.

Some of the self-managed superfunds listed as creditors of the firm had between $140,000 and $233,000 invested on the platform.

At the second creditors’ meeting, which took place on Tuesday in Brisbane for four hours, the creditors finally agreed on a plan to keep Digital Surge operational and repay most customers what they owe over the next five years.

The proposal, by Digico and Digital Surge directors Daniel Ritter and Joshua Lehman, will see Digico lend $1.25 million to Digital Surge to keep the company going.

Customers with less than $250 in their digital wallets will be refunded in full, with the rest receiving 55% of the balance over the next few months. Customers will be paid in either cryptocurrency or regular currency depending on how much they had of each. The remainder will be repaid over the next five years in regular currency out of any quarterly profits made by Digital Surge.

Any funds obtained from FTX’s administrative process will also be distributed to Digital Surge’s creditors by the administrators.

All employees will remain in employment with rights retained. The directors had recommended this option as it would allow the company to continue operating and would result in a better return of funds for creditors.

The administration’s report reveals that between FTX’s November 11, 2022 bankruptcy and Digital Surge’s platform suspension, $6.5 million was withdrawn from Digital Surge’s platform, including more than $31,000 by five employees.

Although the directors found that the directors had not breached any of their duties, questions were raised about one employee’s actions. The trustees found that an employee, or someone acting on their behalf for their super self-managed fund, withdrew $1.6 million in AUD and bitcoin.

Administrators said the anonymous employee confirmed he was aware that Digital Surge was being exposed to FTX. They argued the employee received a direct advantage over other creditors through termination based on that information and had a “significant impact” on the firm’s ability to repay customers in full.

An attorney for the employee told the directors that he was acting in good faith and knowing that Digital Surge had exposure to FTX was not sufficient to infer that the employee had reason to suspect that Digital Surge would default. The administrators disagreed.

On why Digital Surge signed up with FTX just weeks before the company collapsed, creditors’ report reveals that the directors believed FTX was reputable due to their personal experience with using the platform, venture firms capital behind FTX, of the company’s marketing and because FTX held an Australian Financial Services License (AFSL).

Guardian Australia revealed last year that the regulator, the Australian Securities and Investment Commission, had not assessed FTX’s eligibility to hold the license at the time of acquiring the license at the time of acquiring another company.

The company’s reason for transferring such a large amount to FTX at the time was due to the lower transaction fees it would offer to customers.

FTX’s disgraced CEO Sam Bankman-Fried pleaded not guilty to criminal charges for defrauding investors and is currently at his parents’ home in California on $250 million bail.

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