The dramatic collapse of cryptocurrency exchange FTX has impacted nearly 30,000 Australians who are missing “very significant” sums of money, according to FTX Australia administrators, amid concerns the funds in the accounts were left unprotected.
KordaMentha, who has been tasked with overseeing the administration of the Australian arm of the global crypto exchange, which employs five people, revealed that it had received more than 280 emails from customers desperate for information about their accounts and her were looking for money.
In documents filed with Victorian Supreme Court, clients told administrators they believed they had between $40,000 ($60,000) and $1 million ($1.5 million) in FTX invested but their accounts showed zero balances they logged in.
One client spoke about how he wanted to reclaim his $83,000 investment, while another said he was “financially paralyzed”.
“I want my money back,” wrote another in an email.
The $32 billion ($47 billion) cryptocurrency exchange filed for Chapter 11 bankruptcy less than two weeks ago, along with around 130 related companies, including controversial trading firm Alameda Research, which is said to have played a central role in the played implosion.
Disgraced FTX founder Sam Bankman-Fried told former employees he was “deeply sorry” about the implosion of his crypto exchange – but continued to point the finger at the company’s bankruptcy filing and insisted he had the platform could save if he had had enough time.
However, he faces a criminal investigation in the Bahamas and a possible trip to the US to question him over the disappearance of billions of dollars in client funds.
In Australia, admins uncovered A$3 million in FTX Australia accounts that enabled trading and another A$39 million in FTX Express accounts used for local clients to buy crypto in Australian dollars.
But even though the $42 million has been found, administrators are having trouble knowing exactly who owns the money.
KordaMentha Administrator Scott Langdon said in his affidavit that an estimated 29,234 individual customers were impacted who “may have lost significant property.”
He said investigating a cryptocurrency exchange poses different challenges than a typical bankruptcy and asked the court to give the company more time to hold an initial meeting of creditors.
“In such instances, it is not uncommon for some clients to have only a superficial understanding of the products and/or contracts they have entered into and, in the face of losses beyond their control, react differently to commercial creditors who might face losses as usual at the end of their life cycle business,” he said.
“This is reflected in the correspondence we have received from clients where there is an expectation that property or monies will be promptly returned, when in this complex voluntary administration that is unlikely to be the case.”
Administrators have requested that withdrawals be frozen and funds transferred to accounts controlled by KordaMentha.
“The administrators continue to conduct inquiries into the companies’ affairs,” Langdon said.
“We have not yet been able to determine who has beneficial interest in the funds held in the bank accounts. We recognize the need to hold these funds pending the determination of who is the beneficial owner in circumstances where they are subject to third party claims.”
Mr. Langdon will travel to New York to negotiate with US administrators while KordaMentha asks for patience as it begins the process of responding to thousands of inquiries from customers and creditors.
Meanwhile, FTX Australia’s financial services license has been suspended by the Australian Securities and Investments Commission (ASIC).
The contagion from the FTX collapse continues, with Brisbane-based crypto exchange Digital Surge freezing customer accounts for their openness.
The Australian government has pledged to introduce legislation to protect customers’ money and regulate crypto exchanges with new legislation expected to be introduced to Parliament next year.
In the US, the new head of collapsed cryptocurrency exchange FTX, John Ray, has scathingly condemned the company in a court filing, revealing that it has suffered an “unprecedented and complete failure of corporate controls”.
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