Collapsed Australian crypto exchange Digital Surge owed $33m by FTX

More than half of Brisbane company’s digital assets were deposited with Sam Bankman-Fried’s exchange

Collapsed Australian crypto exchange Digital Surge is owed $33m by FTX, one of the biggest cryptocurrency platforms in the world before it collapsed in November.

Brisbane-based Digital Surge passed into administration earlier this month with more than half its digital assets deposited with FTX.

The spectacular downfall of FTX and its former billionaire founder Sam Bankman-Fried, who has been extradited to the US to charges of fraud and conspiracy, has triggered the cryptocurrency equivalent of a global bank run.

The 30-year-old faces eight charges connected to his role in the collapse of the crypto exchange, which carry a maximum sentence of 110 years.

Documents lodged with the Australian Securities and Investments Commission (Asic), revealed Digital Surge had $55.4m of digital assets when it entered administration.

Administrator KordaMentha estimated “the value of assets remaining with the FTX group of companies to be $33m”.

“The administrators have secured $26,800,985 of digital assets controlled by the company. We have also secured in $4,625,922 in cash,” KordaMentha told creditors.

Asic documents also revealed Digital Surge owes a secured $1.05m debt to a company called DigiCo.

KordaMentha has already received hundreds of emails from customers who have been left out of pocket by the collapse of FTX, with some reporting losses worth hundreds of thousands of dollars.

“At present, the administrators are not in a position to estimate the expected return to creditors,” the company said.

The directors of Digital Surge are working with stakeholders to prepare a rescue package, although little is known about the plan, with administrators only receiving a “high-level summary”.

“The future of the company will be determined by its creditors,” the KordaMentha document said.

Customer accounts were frozen by Digital Surge on 16 November and trading was still blocked on Friday morning.

“The digital assets secured by the administrators will continue to remain frozen during the administration process,” KordaMentha told creditors.

“All assets in the possession of the company at the time of our appointment, which includes cryptocurrency and fiat currency, are now under the control of the administrators.”

KordaMentha partner Scott Langdon said he was pleased with the cooperative approach taken by the directors of Digital Surge.

“We fully appreciate the uncertainty the voluntary administration will create,” Langdon said.

“We will proactively and regularly communicate with customers to ensure they are fully informed on the progress of the administration.”

The federal government is expected to introduce legislation to regulate cryptocurrency in 2023.


Henry Belot

The GuardianTramp

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