Australian cryptocurrency exchange Digital Surge appears to have narrowly avoided collapse despite having millions of dollars in digital assets tied up in the now-bankrupt FTX crypto exchange.
On Jan. 24 local time, Digital Surge’s creditors approved a five-year bailout, which aims to eventually pay back the 22,545 customers who had their digital assets frozen on the platform since Nov. 16, while allowing the exchange to continue operating.
The rescue plan was first presented to clients via email by the exchange’s directors on Dec. 8, the same day the company went into receivership.
Under the “Deed of Company Arrangement,” the Australian crypto exchange will receive a loan of $884,543 (AU$1.25 million) from affiliate Digico, which will allow the exchange to continue trading and operating.
In a statement, KordaMentha administrators said creditors would be paid out of the exchange’s net quarterly profits for the next five years.
“Clients will be reimbursed in cryptocurrency and fiat currencies depending on the asset composition of their individual claims,” said KordaMentha, according to a Jan. 24 report from Business News Australia.
TSTIME contacted Digital Surge, who confirmed that a resolution had been voted in favor of the bailout at the second meeting of creditors on January 24.
“We expect further communication to be provided to all customers as the administration process with KordaMentha progresses,” it added.
The Brisbane-based crypto exchange had been operating since 2017, but became one of the victims of FTX’s collapse last November, which saw withdrawals and deposits frozen just days after FTX filed for bankruptcy and FTX Australia went into receivership .
At the time, Digital Surge explained that they had “some limited exposure to FTX” and would update customers within two weeks – though it was later revealed to be around $23.4 million, according to Digital Surge administrator KordaMentha.
Related: ‘There will be many more Zeros’ – Kevin O’Leary on FTX-like collapses to come
The exchange is one of the few crypto companies that has put in place a solid plan to restart operations and avoid liquidation despite significant exposure to FTX.
Since November, crypto companies, including crypto lenders BlockFi and Genesis, have filed for Chapter 11 bankruptcy protection due to exposure to the fallout from FTX and market turmoil.