Digital Surge narrowly avoids collapse
Luisa Crawford Jan 26, 2023 10:46
Digital Surge creditors agree five-year rescue plan to keep exchange running. KordaMentha will pay creditors from the exchange's quarterly net earnings over five years. Customers were sent the rescue plan on December 8.
Despite having millions of dollars' worth of digital assets locked up in the now-defunct FTX cryptocurrency exchange, the Australian cryptocurrency exchange Digital Surge looks to have barely averted collapse.
A five-year bailout plan for Digital Surge was approved by the company's creditors on January 24 (local time), with the goal of eventually refunding its 22,545 customers who have had their digital assets frozen on the platform since November 16. This plan will also allow the exchange to continue operating normally.
On December 8, the day the firm was placed under administrative control, the directors of the exchanges sent an email to the company's clients with a rescue plan for the first time.
The Australian cryptocurrency exchange will be able to continue trading and operate as normal thanks to the "Deed of Company Arrangement," which stipulates that the exchange will get a loan from a related company, Digico, in the amount of 1.25 million Australian dollars ($884,543).
The administrators at KordaMentha issued a statement in which they claimed that payments to creditors will be made out of the exchange's quarterly net earnings over the course of the next five years.
According to an article that was published on January 24 by Business News Australia, KordaMentha was quoted as saying on that day that "customers would be compensated in cryptocurrency and fiat cash, depending on the asset composition of their particular claims."
In addition, it was stated that "we anticipate additional notification will be delivered to all clients as the administration process with KordaMentha unfolds."
The cryptocurrency exchange with its headquarters in Brisbane had been operating since 2017, but in November it became one of the victims of the collapse of FTX. The exchange froze withdrawals and deposits only a few days after FTX filed for bankruptcy and FTX Australia was placed under administration.
At the time, Digital Surge indicated that they had "some limited exposure to FTX" and that they would inform clients in two weeks' time; nevertheless, it was subsequently found that this exposure amounted to around $23.4 million, according to KordaMentha.
Despite having a significant amount of exposure to FTX, the exchange is one of the very few crypto companies that has developed a concrete strategy to restore operations and prevent insolvency.
Since November, a number of cryptocurrency companies, including crypto lending businesses BlockFi and Genesis, have sought protection under Chapter 11 of the United States Bankruptcy Code as a consequence of their exposure to the impact of FTX and market instability.
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