Digital Surge Australian Crypto Exchange Enters Admin

Digital Surge Enters Voluntary Administration

Australian Crypto Exchange, Digital Surge, has announced it is entering voluntary administration, suspending around 30,000 Australian customer accounts. 

Digital Surge was formed in 2017 as a way for Australian cryptocurrency enthusiasts to trade cryptocurrencies such as Bitcoin and Ethereum.

In a statement, administrator Scott Langdon said Digital Surge’s directors were cooperating with the process and that the platform’s customers were the “highest priority”.

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

 

Administrator Confirms Customer Priority Amid Collapse

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

This has left some customers remaining in heavy suspense, as many Australians now have savings and superannuation tied up. 

Speaking to ABC news, Kamal Jain has all of his superannuation – more than $150,000 – sitting frozen in a Digital Surge account.

“I lost everything,” he said. “It’s a big setback and there’s nothing I can do.”

The exchange is the latest in a string of cryptocurrency exchange wipe outs as a result of FTX going under in early November. 

Just last week, Brisbane crypto exchange, Swyftx, laid off 35% of its workforce, cutting 90 jobs. Swyftx did assert that it doesn’t have any direct exposure to FTX themselves, although the job cuts are a result of the downturn caused by the black swan event as a result of FTX going under. The crypto exchange has about 630,000 customers, according to a blog post from Swyftx co-founder Alex Harper.

According to documents filed with the Australian Securities and Investments Commission last week, Swyftx has suffered a 23 per cent fall in its after-tax profit due to a sharp downturn in crypto prices and a global investor rejection of riskier assets in a rising interest rate environment.

Another Australian-founded exchange, CoinJar, laid off 20% of its workforce last week. Moreover, international derivatives exchange, ByBit, has recently announced a 30% layoff of its staff as it braces the FTX storm. 

Here in Australia, people who had funds in FTX are at a loss about the next steps, with ABC News being told some individuals are facing losses upwards of $500,000.

Digital Surge has not yet revealed how much of its clients’ cash is caught up in the FTX collapse.

“Digital Surge has always held a reserve of 1:1 for all user deposits, however due to our exposure to FTX, this is now unknown,” it said last month.

Digital Surge sent its clients correspondence last night as the voluntary administration was filed outlining what it says is a “proposed rescue plan”.

Now the company is in administration, both KordaMentha and the tens of thousands of creditors have to decide if they should try to keep it trading or wind up the company and divvy up what assets are left over. 

Digital Surge’s chief executive Dan Rutter said if creditors decided to save the company, directors would make a “payment in excess of $1 million”.

He also wrote that “profits from Digital Surge [will be] applied to customer balances for the next  five years”.

“The aim and purpose of this is to provide an opportunity for you, our users, to be made whole over time, and preserve as much as possible of your digital holdings,” Mr Rutter wrote.

“There’s no denying this has been an extremely difficult and upsetting time for everyone in the cryptocurrency sector.”

According to ABC news, Kamal Jain said he “wasn’t clear” on the proposed plan offered up by Digital Surge, but that some of it seemed tempting.

“If they give me my coins back after five years then I’m happy, as I wasn’t planning to get my coins back until then anyways,” he said. “I am not feeling optimistic.”

People owed money by Digital Surge, which includes all of the investors, are being invited to the first meeting of creditors in eight days. Administrations of companies can drag on for months or even years.

The collapse of FTX and now Digital Surge’s woes have been highlighting the lack of regulation of the cryptocurrency sector in Australia.

“Crypto exchange businesses are not regulated by ASIC and crypto assets are largely unregulated in Australia,” corporate regulator the Australian Securities and Investments Commission said last month.

“ASIC is very concerned that Australians who invested in crypto may not have fully understood the risks and may have lost money in this year’s collapse in valuations.

“ASIC has repeatedly warned investors that crypto is incredibly risky, inherently volatile and complex.”

The Australian government is looking at tighter laws to regulate the decentralised form of trading.

Conclusion: