Prior to the next meeting with the administrator, there will be a DOCA (Deed of Company Arrangement for creditors) released, which will set out a proposal under which Digital Surge will resume trading, customers will get what is currently available returned as a % of assets (thought to be in the range of 40 - 50%), and the rest returned periodically as it is either recovered from FTX or generated as profits over 5 years.
The alternative would be liquidation, where creditors will receive a % of their money back in AUD, based on their accounts value on 8th December 2022.
People are understandably angry at the position we have been put in, and especially with the timeline - that over 50% of assets were moved to FTX just days before the collapse. There are many questions still to be answered as to whether or not actual negligence or foul play has been afoot, what incentives were given to encourage this huge transfer, especially when customer assets were thought to be in secure cold storage, with only a small amount on exchanges to facilitate trades.
Under the DOCA, the existing staff and directors would continue to work for the company, and the salaries of these staff, especially the directors themselves will be under scrutiny that despite their poor decision making will still be taking good salaries regardless of the profitability of the business, and as creditors will be repaid from profit not turnover, every $ spent on overheads will be a $ further from repayment of customers.
My current view, with the information we have is that I would much prefer my coins back than their value at Dec 8th, it seems the only way this happens is with the DOCA. With $ it’s a taxable event, I have to calculate CGT gain or loss and if I want to rebuy then the 12 month clock for the CGT discount starts again. What is the benefit of liquidation, especially if my coins (e.g SOL) have gained significantly since Dec 8th, at this rate I could get 50% of my coins and it would be worth more than 100% of my cash on Dec 8th.
This with the possibility of getting more back further down the line, if more is recovered from FTX, or from any potential future profits seems like a no-brainer to me. As I understand it there is no need to keep your coins on Digital Surge if the DOCA is passed so you can ‘bank’ that repayment in coins to a personal wallet, therefore no risk of losing it if Digital Surge was to ultimately fail. I certainly want more information about the decisions that were made around FTX, the timing and amount of the transfers are suspicious, what incentive was given to move these funds and how was the risk assessed, and if reckless then absolutely further action should be taken, I don’t believe the DOCA precludes this, but obviously we need to see exactly what is offered before making a final decision.
There are a couple of Facebook groups and a Telegram chat for more information, if you are a creditor you can apply to join with the email you are registered with Digital Surge, you should also register with Korda Mentha (the administrators) as a creditor.
Facebook group set up by company directors:
https://www.facebook.com/groups/dsdirectorsrescuepackage
Unofficial DS creditors group:
https://www.facebook.com/groups/878175516693484/
Telegram:
My first blog on this subject: https://www.publish0x.com/frmkii-random-crypto-musings/collapse-of-australian-exchange-digital-surge-xjrxqlq
My follow up blog: https://www.publish0x.com/frmkii-random-crypto-musings/australian-exchange-digital-surge-collapse-update-xnnzqed
