Tens of thousands of Australian investors with superannuation and savings tied up in cryptocurrency remain in suspense, as a major Australian broker collapses into voluntary administration.
Digital Surge froze the trading accounts of its 30,000 clients last month. This means people with money in the broker cannot access their funds.
Now, a month later, the Brisbane-based cryptocurrency broker has entered voluntary administration.
Voluntary administration is generally something a company does when it is either at risk of insolvency or is already insolvent.
Insolvency is when a company cannot pay its debts as and when they are due.
Kamal Jain has all of his superannuation – more than $150,000 – sitting frozen in a Digital Surge account.
“I lost everything," he said.
"It’s a big setback and there’s nothing I can do."
Digital Surge's administrators KordaMentha confirmed the company had about 30,000 clients and had been offering them trading in more than 300 cryptocurrencies.
The woes being experienced by Digital Surge are tied to the collapse of the global crypto exchange FTX.
FTX allowed people to trade in the non-state-backed market in a centralised way, like investing in shares.
The company, once promoted by stars like Larry David and Tom Brady, declared bankruptcy in early November after revelations about its business practices led to a run on funds by customers.
Here in Australia, people who had funds in FTX are at a loss about the next steps, with ABC News being told some individuals are facing losses upwards of $500,000.
Meanwhile, values of the so-called coins at the centre of cryptocurrency markets are continuing to crash.
Digital Surge has not yet revealed how much of its clients' cash is caught up in the FTX collapse.
"Digital Surge has always held a reserve of 1:1 for all user deposits, however due to our exposure to FTX, this is now unknown," it said last month.
'Not feeling optimistic' about rescue plan
Digital Surge billed itself as an "effortless" way to invest in crypto, including through its self-managed super funds (SMSF).
SMSFs allow clients to invest their retirement savings in products they choose themselves – from property, shares and bonds, to the volatile crypto market – rather than relying on a super fund to do this for them.
Retail investors like Kamal Jain set up an SMSF that invested in Digital Surge through another financial website, ESuperFund.
ABC News has spoken to other distressed investors in Digital Surge who have hundreds of thousands of dollars wrapped up in the scheme.
Neither administrators KordaMentha nor the company have confirmed how much money is in limbo as they try to rescue the company.
Digital Surge sent its clients correspondence last night as the voluntary administration was filed outlining what it says is a "proposed rescue plan".
Now the company is in administration, both KordaMentha and the tens of thousands of creditors have to decide if they should try to keep it trading or wind up the company and divvy up what assets are left over.
Digital Surge's chief executive Dan Rutter said if creditors decided to save the company, directors would make a "payment in excess of $1 million".
He also wrote that "profits from Digital Surge [will be] applied to customer balances for the next five years".
"The aim and purpose of this is to provide an opportunity for you, our users, to be made whole over time, and preserve as much as possible of your digital holdings," Mr Rutter wrote.
"There's no denying this has been an extremely difficult and upsetting time for everyone in the cryptocurrency sector."
Kamal Jain said he "wasn't clear" on the proposed plan offered up by Digital Surge, but that some of it seemed tempting.
“If they give me my coins back after five years then I’m happy, as I wasn’t planning to get my coins back until then anyways," he said.
“I am not feeling optimistic."
What are the next steps for Digital Surge and FTX investors?
People owed money by Digital Surge, which includes all of the investors, are being invited to the first meeting of creditors in eight days. Administrations of companies can drag on for months or even years.
The Australian arm of FTX is also in voluntary administration with KordaMentha. Its investors here appear to have up to $1 million tied up in the firm.
KordaMentha has been telling local FTX investors not to expect all of their cash back.
On Friday, KordaMentha updated creditors on the FTX collapse and its entity in Australia.
"I need to emphasise this is an incredibly complex matter that is going to take a significant amount of time to work through," administrator Scott Langdon said.
Digital Surge client Michael Jenner is another worried investor. He has $14,000 in savings in a frozen account.
"I'm gutted really," he told ABC News.
"The problem with the bail out plan is that it's over five years."
Mr Jenner is among many investors asking for answers about how their savings appear to have been traded into FTX.
The collapse of FTX and now Digital Surge's woes have been highlighting the lack of regulation of the cryptocurrency sector in Australia.
"Crypto exchange businesses are not regulated by ASIC and crypto assets are largely unregulated in Australia," corporate regulator the Australian Securities and Investments Commission said last month.
"ASIC is very concerned that Australians who invested in crypto may not have fully understood the risks and may have lost money in this year's collapse in valuations.
"ASIC has repeatedly warned investors that crypto is incredibly risky, inherently volatile and complex."
The Australian government is looking at tighter laws to regulate the decentralised form of trading.
