Crypto crash: How much Aussie FTX creditors will get back
Administrators overseeing the Australian operations of collapsed cryptocurrency exchange FTX have revealed how much creditors will get paid and when.
Creditors of the Australian arms of collapsed cryptocurrency exchange FTX – which was once valued at $32bn – are set to receive all the money back by June, it can be revealed.
KordaMentha’s John Mouawad and Scott Langdon who have been appointed administrators of FTX Australia and FTX Express are set to hold a creditors meeting in March, with the first and final distributions to be paid within three months after that.
Mr Mouawad and Mr Langdon wrote in a letter to creditors – seen by The Australian – that they are likely to receive all their money back, collectively about $30m, defying previous expectations.
FTX’s Australian entities had about $40m in cash, allowing creditors to be paid in full. Any surplus cash will be sent to entities ultimate shareholder, FTX Trading, which entered Chapter 11 bankruptcy in the US in late 2022.
Mr Mouawad and Mr Langdon have detailed how payments – which will be made subject to proof of debt – will work.
The pair said creditors would not be able to “double dip” by making a claim against the FTX Trading.
“The claims that will be adjudicated, and the potential dividend returned by the (Australian) administrators and/or the (US) Chapter 11 debtors, are mutually exclusive. There is no ability for creditors to “double dip” by claiming the same debt or loss in both jurisdictions,” Mr Mouawad and Mr Langdon wrote.
“For example, if a customer had an overall balance of $9000 on the FTX.com platform, consisting of an AUD pending withdrawal of $1000, crypto-assets worth $3000 and a pending USD withdrawal of $5000 at the appointment date, they will likely be admitted as creditor of FTX Express for $1000 only.
“The other portions of their claim will be adjudicated by the Chapter 11 debtors.”
Mr Mouawad and Mr Langdon have identified 747 customers who are likely to be creditors of FTX Express that had pending Australian dollar withdrawals, and about 15 trade creditors and employees who are likely to be creditors of FTX Australia.
They sent the letter to creditors days after lawyers guiding FTX through its bankruptcy in the US said they expected to pay approved claims in full after it opted for liquidation rather than rebuilding the exchange.
Despite having enough assets to repay creditors in full, it is understood lawyers could not find a buyer for FTX, which was once valued at $US32bn – underscoring the scale of the brand damage to the company after its founder Sam Bankman-Fried was found guilty of numerous fraud charges
But Mr Mouawad and Mr Langdon will provide another update to creditors by the end of this week, outlining the next steps on recovering their money.
FTX’s demise reverberated across the globe. Brisbane-based Digital Surge went into administration in December 2022 and froze the accounts of its 30,000 customers after it was caught up in FTX’s collapse, which has been likened to that of failed energy giant Enron.
Some creditors had more than $100,000 in self-managed super invested in Digital Surge.
Last January, Digital Surge creditors voted for a rescue plan recommended by Mr Langdon, Mr Mouawad and David Johnstone, also of KordaMentha, in which creditors would recoup all of their investments.
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.
While the cryptocurrency market is bouncing back after a torrid 2022, the collapse of FTX and other big players have scarred the industry.
ASIC chairman Joe Longo has repeatedly made his views on crypto clear, warning of his concern that many investors were piling into the unregulated assets only to be burned.
Australian Sam Lee – whose Blockchain Global failed, leaving local creditors $58m out of pocket – was charged last month with a massive $US1.89bn fraud by US regulators after his alleged co-conspirator “Bitcoin Beautee” pleaded guilty.
The US Securities and Exchange Commission has filed suits against Mr Lee, 35, of Elsternwick, Victoria, Brenda Chunga, also known as “Bitcoin Beautee”, of Maryland in the US, as well as Rodney Burton, also known as “Bitcoin Rodney’’, of Miami.
Among the allegations are that Mr Lee’s company HyperFund “claimed to be a project dedicated to creating a so-called “decentralised finance (DeFi) ecosystem” for crypto asset market participants’’ even hired an actor to pose as its chief executive officer in order to bilk investors out of their money, according to court documents.
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