Australians caught in FTX’s collapse are likely to get money back, group’s lawyers say

About 30,000 Australians were caught by the collapse of the world’s second biggest cryptocurrency exchange but FTX’s lawyers say a liquidation should return money to creditors.

Former FTX chief Sam Bankman-Fried was in November found guilty by a New York jury on seven counts of fraud, embezzlement and criminal conspiracy. Picture: AFP

Australians caught up in the ­collapse of cryptocurrency exchange FTX are set to get the money back after the company abandoned efforts to rebuild itself, the failed group’s lawyers say.

About 30,000 Australians had money tied up in FTX – which has been negotiating with creditors and investors for months after it declared bankruptcy in late 2022. The group has opted for a liquidation that it says should allow it to repay its customers in full.

Customers and creditors held little hope they would get their money back, believing they would receive only cents on the dollar for their holdings. FTX Australia’s administrators had previously warned some Australian customers had lost “very significant” sums of money and that many were unlikely to see the return of their investment.

But lawyers guiding FTX through its bankruptcy said that they now expected full repayment for approved claims, opting for liquidation after it failed to find a buyer.

It comes a year after Brisbane-based Digital Surge creditors voted to approve a five-year bailout plan for the cryptocurrency group, allowing it to narrowly avoid collapse despite being owed more than $30m by FTX.

Digital Surge went into administration in December 2022 and froze the accounts of its 30,000 customers after it was caught up in the dizzying collapse of FTX, which has been likened to that of failed energy giant Enron.

The local group had described itself as “the best place to buy, sell and trade crypto in Australia”, and had $33m worth of assets tied up in FTX, according to an investigation by administrators.

Last January, Digital Surge creditors voted for a rescue plan recommended by KordaMentha administrators Scott Langdon, John Mouawad and David Johnstone, in which creditors would recoup all of their investments.

Some creditors had more than $100,000 in self-managed super invested in Digital Surge.

Under rescue plan, proposed by major creditor Digico and the company’s directors Daniel Ritter and Joshua Lehman, creditors with an account balance below $250 would be paid out in full, while creditors with balances of $250 and above would be repaid over five years dependent on Digital Surge making a net profit on a quarterly basis.

FTX was the second-largest crypto exchange globally, behind Binance, before its collapse. The exchange’s founder Sam Bankman-Fried has since faced numerous fraud charges related to allegations he paid debts incurred by his crypto hedge fund, Alameda Research.

US prosecutors accused the one-time cryptocurrency golden boy of stealing billions of dollars of his customers’ money. He was found guilty last November on all counts and faces up to 110 years behind bars.

The jury reached its decision in just five hours after a trial in New York lasting five weeks. He will be sentenced in March.

Additional reporting: AFP