The implosion of FTX last year led to a chain of similar collapses as a result of links to the exchange leading to staggering losses and thousands of disappointed investors.
Digital Surge, a Brisbane-based cryptocurrency exchange, will continue to operate after its investors agree to a long-term deal to keep the company afloat as it recovers from the losses of FTX. The company’s unfortunate event began when it transferred $33 million worth of assets to FTX two weeks before its collapse in November.
To satisfy all competing interests effectively, the company went into administration in December, and in a report released last week by KordaMentha, the company’s administrators, it was revealed that the company had 22,545 customers at the time of administration.
The second meeting of creditors gave the company the needed lifeline as they approved several restructuring proposals, as reported by Business News Australia. First, a $1.25 million loan was approved from Digico, allowing the firm to continue trading.
The Deed of Company Arrangement shows that customers with less than $250 will be paid in full, while those with more than $250 will receive 55% of their assets in the next few months. Customers will either be paid in digital currency or fiat as they choose, but the balance of 44% will be spread across five years and will be paid out of the quarterly profits of the exchange.
As the norm in corporate administration, an investigation into the affairs of the company was carried out by KordaMentha. It was revealed that before the FTX went into bankruptcy, $6.5 million was withdrawn from Digital Surge along with $31,000 by five employees.
After investigations, the firm came to the conclusion that the directors of the company acted in good faith without breaching their duties, but the actions of an employee were questionable. The employee, whose name was withheld, withdrew $1.6 million worth of Bitcoin and Australian Dollars despite being aware of the company’s exposure to FTX, thereby deriving benefits over other creditors.
On the part of the directors, they stated that they transferred funds to FTX because they believed it was a reputable exchange at the time, as FTX held an Australian Financial Services License.
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