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Brisbane fintech Digital Surge is the latest cryptocurrency exchange in voluntary administration

Brisbane fintech Digital Surge is the latest cryptocurrency exchange to be placed under voluntary administration in the wake of the US stock market collapse.

KordaMentha Restructuring’s Scott Langdon, John Mouawad and David Johnstone were appointed as volunteer trustees on Thursday, after the fintech’s directors made the decision on Wednesday to close the VA company.

Digital Surge was founded in 2017 by Dan Rutter and Josh Lehman. The pair reportedly hope to inject their own money into a Deed of Business Agreement (DOCA) to save the company from bankruptcy and pay back customers.

The exchange has about 30,000 Australian customers and offers access to more than 300 cryptocurrencies. It used the US exchange FTX – the local branch is also voluntarily managed by KordaMentha – for some transactions.

In a post last month, Rutter said that Digital Surge has “limited exposure to FTX” in both Australian dollars and digital assets, but did not hold 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 facing liquidity issues in the near term” and “are exploring options with industry partners to resolve these issues.”

The company stopped recording at that point.

“Due to the impact of FTX, we are unable to do business as usual. Until a permanent fix is ​​implemented, Digital Surge is required by law to suspend all deposits and withdrawals. This is in the interest of all users as a whole,” he said.

Trading continued until Thursday afternoon, when it was also suspected, and users were informed of the DOCA plan, which, if accepted by creditors, will pay them back from alleged profits in 5 years.

KordaMentha’s Scott Langdon said he was “very pleased with the directors’ cooperative and collaborative approach” to understanding Digital Surge’s financial position and securing fiat and digital assets.

“We fully appreciate the uncertainty that the voluntary administration will create. We will proactively and regularly communicate with customers to ensure they are fully informed of the progress of the administration,” he said.

Customer or creditor inquiries can be emailed to [email protected]

The domino effect

In an already turbulent year for the crypto sector, in which the value of digital assets plummeted, the industry’s litany of woes began in May with the Luna crypto crash due to the supposed stablecoin TerraUSD, which wiped out approximately $42 billion in investor value.

Singapore-based crypto hedge fund Three Arrows Capital (3AC) filed for bankruptcy in May as a result and is exposed to the turn of around US$10 billion.

New Jersey-based crypto lender Voyager Digital then applied bankruptcy in the US in July after 3AC standard on a crypto loan worth more than $650 million. FTX would go on to buy the company for over $1 billion before going bankrupt as well.

Another Luna/Terra victim was crypto lender Celcius Network, which filed for US bankruptcy in July. Investors took a small win this week when a US bankruptcy court ruled that some customers must be reimbursed their deposits.

BlockFi was the first crypto company to fall after the FTX implosion, Submit for Chapter 11 bankruptcy two weeks later.

Following the collapse of FTX and the crypto trading firm Alameda Research affiliated with founder Sam Bankman-Fried, FTX Australia went into receivership on November 11.

An initial creditors’ meeting for FTX Australia was held on Dec. 1, with administrator John Mouawad and his colleagues at KordaMentha revealing that all cryptocurrencies purchased by Australian clients appear to be held by FTX Trading Limited, the Bermuda-based parent company.

Mouawad said the administrators will continue to work with US bankruptcy advisers to further investigate whether or not the cryptocurrency assets related to Australian clients who used both companies’ services existed.

“This is a complex situation that requires careful and detailed analysis. While we understand that this creates some uncertainty, we must take the time to thoroughly resolve all issues and achieve the best possible outcome for customers and creditors,” he said.

Given the complexity, the administrators said they would ask the court to extend the deadline to convene the second meeting of creditors.

Meanwhile, another Brisbane-based crypto exchange, Swyftx, has cut 90 jobs this week. The fintech laid off about 36% of its remaining 250-person workforce, after shedding 74 positions less than four months ago, when the workforce reached 320.

Last week, Melbourne Exchange CoinJar cut 20% from its 50-person team. It has about 500,000 users and manages about $1 billion in funds.


Shreya has been with australiabusinessblog.com for 3 years, writing copy for client websites, blog posts, EDMs and other mediums to engage readers and encourage action. By collaborating with clients, our SEO manager and the wider australiabusinessblog.com, Shreya seeks to understand an audience before creating memorable, persuasive copy.

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