Brisbane fintech Digital Surge is the latest cryptocurrency exchange to be placed in voluntary administration in the wake of the collapse of US exchange.
Scott Langdon, John Mouawad and David Johnstone from KordaMentha Restructuring were appointed voluntary administrators on Thursday, after the fintech’s directors made the decision to put the business in VA on Wednesday.
Digital Surge was founded in 2017 by Dan Rutter and Josh Lehman. The pair are reportedly hoping to injection their own cash into a deed of company arrangement (DOCA) to save the business from bankruptcy and refund customers.
The exchange has around 30,000 Australian customers and offers access to more than 300 cryptocurrencies. It had been using the US exchange FTX – it local arm is also in voluntary administration with KordaMentha – for some trades.
In a post last month, Rutter said Digital Surge “has some limited exposure to FTX” in both Australian dollars and digital assets, but did not have any of FTX’s FTT tokens.
He said the company was still solvent at the time, but “due to our exposure to FTX, we are experiencing some short-term challenges with liquidity” and was “exploring options with industry partners to overcome these issues”.
The company stopped withdrawals at that point.
“Due to the impact of FTX, we are not able to operate business as usual. Until a permanent solution has been implemented, it is a legal requirement for Digital Surge to suspend all deposits and withdrawals. This is for the benefit of all users as a whole,” he said.
Trading had continued until Thursday afternoon, when it too was suspected, and users were told of the DOCA plan, which, if accepted by creditors, will see them repaid over 5 years from supposed profits.
KordaMentha’s Scott Langdon said he “was very pleased with the cooperative and collaborative approach taken by the directors” to understand Digital Surge’s financial position and to secure fiat and digital assets.
“We fully appreciate the uncertainty the voluntary administration will create. We will proactively and regularly communicate with customers to ensure they are fully informed on the progress of the administration,” he said.
Customer or creditor queries can be emailed to [email protected]
The domino effect
In an already turbulent year for the crypto sector, with digital asset values plummeting, the industry’s litany of woes began back in May with the Luna crypto crash due to the supposed stablecoin TerraUSD, obliterating around US$42 billion in investor value,
Singapore-based crypto hedge fund Three Arrows Capital (3AC) went bankrupt in May as a consequence, are being exposed to the turn of around US$10 billion.
Meanwhile, another Brisbane-based crypto exchange, Swyftx cut 90 jobs this week. The fintech laid off around 36% of its remaining workforce of 250 people, having cut 74 roles less than four months ago, when the headcount sat at 320.
Last week Melbourne exchange CoinJar cut 20% of its 50-member team. It has around 500,000 users and managing around $1 billion in funds.