Failed crypto exchange FTX’s local arm holds no crypto itself, as thousands wait for answers

The collapsed platform has almost 30,000 customers in Australia, but most are unlikely to be able to recover debts, KordaMentha warns.

Sam Bankman-Fried, co-founder and chief executive officer of FTX. Picture: Lam Yik/Bloomberg

Customers of the Australian arms of collapsed crypto exchange FTX could have no chance to claiming back their losses after administrators warned their debts were likely held in the Caribbean.

The local companies – FTX Express Australia and FTX Australia – have no cryptocurrency assets at all, clients were told on Thursday.

Around 28,000 Australians have been caught up in the collapse of the company, led until recently by Sam Bankman-Fried, with some customers claiming to be $US1m ($1.5m) out of pocket.

An estimate of the total amount owed to local FTX customers is yet to be released.

KordaMentha’s John Mouawad, Scott Langdon and Rahul Goyal were appointed administrators of the local entities on November 24, and on Thursday held the first creditors’ meeting.

The administrators said their preliminary investigations found that the two companies “do not hold any cryptocurrencies or operate any digital wallets’’ and all cryptocurrencies purchased by Australian customers “appear to be held by FTX Trading Limited (a company not in voluntary administration and domiciled in Antigua and Barbuda)’’.

FTX Express is owned by FTX Australia, which is in turn owned by the offshore firm FTX Trading.

“At this stage, FTX Trading Limited (not part of the Australian administration process) continues to investigate the existence and entitlement to the crypto assets,’’ the administrators said.

Preliminary advise indicates that a customer’s qualification as creditor relates to the existence of open transactions handled by the local entities, rather than the actual ownership of cryptocurrency.

“Customers who transferred cryptocurrencies to FTX.com on chain (no fiat currency conversion) are unlikely to be creditors of FTX Express or FTX Australia. They may be creditors of FTX Trading Limited,’’ the administrators said in a statement.

“Customers who transferred fiat currency to FTX.com may be creditors of FTX Trading. Customers who requested withdrawals in fiat currency that were not fulfilled prior to appointment may be creditors of FTX Express.

“Customers who held open derivative positions at the time of the appointment may be a creditor of FTX Australia.,” they added.

The administrators said that on the information they had available to them, there were about 4000 derivate positions held.

Mr Mouawad said the administrators would continue to work with the US bankruptcy advisers to investigate the existence of the cryptocurrency assets relating to Australian customers that used both companies’ services.

“This is a complex situation requiring careful and detailed analysis,’’ he said. “While we appreciate this generates some uncertainty, we need to take the time to be as thorough as possible to work through all of the issues and drive the best outcome possible for customers and creditors.’’

Given the complexity of the situation, the administrators said they would be applying to court for an extension of time to convene a second meeting and provide more detailed report.

Mr Bankman-Fried on Thursday denied he had “knowingly” misused funds deposited by customers. FTX collapsed after they attempted to withdraw a significant amount of funds following the disclosure that they may have been used by a related business to place bets on the market.