Aussies face crypto contagion as Digital Surge overtakes customers

Aussies face crypto contagion as Digital Surge overtakes customers

But Mr. Jenner was reassured by employees that the company was unaffected by the external events that were unfolding around the world.

“We maintain a 1:1 reserve on all user assets and separate transactions involving user funds,” Mr. Jenner was told on March 10 The Australian Financial Report.

“We will be operating as normal – definitely a very volatile and scary time for many investors.”

When Mr. Jenner pressed further to find out which platforms Digital Surge uses for its crypto trading services, he was told that these “private partnerships” could not be disclosed.

“But rest assured[d] that we are unaffected by the fall of the FTX,” the Digital Surge representative read in the message.

“If you are concerned about the safety of your assets. You are welcome to withdraw your assets and keep them yourself.”

Mollified by the reassurances, Mr. Jenner and other Digital Surge customers spoke to the Financial review their investments, which ranged from $14,000 to more than $500,000, were not immediately withdrawn.

But when the extent of FTX’s bankruptcy was revealed, Digital Surge’s clients found that their accounts were frozen on November 16, and the company admitted it was exposed to FTX’s collapse after all.

Digital Surge co-founder and CEO Dan Rutter did not answer questions about how much client money was exposed to FTX or if the company had money set aside for investor repayments.

Questions about Digital Surge’s solvency were also ignored.

“We are shocked by the news from FTX and Alameda and their significant impact on the cryptocurrency sector,” Mr. Rutter said in an emailed statement.

“Digital Surge is FTX exposed and we are currently assessing the situation. All deposits and withdrawals on our platform are therefore suspended until further notice.

“We are reaching out to FTX Group US advisors and will keep clients informed as the situation evolves.”

hard market

While Digital Surge’s investors are screaming to know if the exchange is involved in FTX Australia’s ongoing bankruptcy proceedings, Swyftx executives are bracing themselves for a rough patch raising capital.

The Brisbane-based exchange is in the midst of a merger with budget stockbroker Superhero and has hired Spartan Group, a specialist blockchain investment and advisory firm based in Singapore and Hong Kong, to begin attracting investors for more money .

Swyftx vehemently denied it had any exposure to FTX. The group said the cash withdrawal for an undisclosed amount would help it establish itself as one of Australia’s dominant fintechs, though it had to integrate the Superhero business with a delay it attributed to regulatory and customer service issues.

“Swyftx’s uniquely strong customer experience offering is a model that we expect will translate well into new markets, particularly where there is strong grassroots adoption of digital assets and other asset classes,” the company said in a statement.

Swyftx Superhero reportedly still owes $55 million under the acquisition it agreed to in June 2021 near the top of the cryptocurrency and tech stock bubble.

“We have not set a timeline for full integration between Swyftx and Superhero. Our priority is getting the merger right for our customers and regulators, not fast,” the company said. “If that means the platforms will take more time to integrate, so be it.”

The crypto exchange has 600,000 customers and offers trading in more than 300 cryptocurrencies, including digital flagships Bitcoin and Ethereum, despite laying off 74 workers, or 21 percent of its workforce, just three months ago.

It uses the world’s largest crypto exchange, Binance, as its liquidity provider to match trades, although it says it does not work with them solely as a counterparty.

Proof of reserves

Swyftx said Australian crypto companies are operationally healthy, although FTX’s collapse is casting a shadow over the sector.

To underscore its commitment to good governance, Swyftx is one of nine local exchanges that this week committed to disclosing their audited financial results and providing on-chain “proof of reserves” through lobby group Blockchain Australia.

CoinJar, Independent Reserve, BTC Markets, Caleb & Brown and Binance Australia are among the dedicated signatories, with Coinbase and Elbaite adding their support despite not holding any digital currencies on behalf of clients.

The Australian Stock Exchanges have stated that customer balances are held on a 1:1 basis, with cash deposits being held entirely in reserve and no customer funds or assets being passed on to any third party.

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