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Australian creditors furious as FTX Global comes knocking

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FTX Australia creditors were furious to discover that the global parent company founded by Sam Bankman-Fried’s FTX Group is one of the largest creditors in the Australian bankruptcy proceedings on Thursday.

Administrators are trying to claw back millions of dollars lost during the exchange’s dramatic collapse last month. Global parent FTX Group, represented by Clayton Utz, was nominated to a committee that would represent the broader group of Australian investors throughout the bankruptcy proceedings.

Since the implosion, several major crypto firms with close ties to FTX have come under mounting financial pressure.  AP

At the urging of administrators KordaMentha, investors ranging from individuals to large trading outfits voted down the proposal to form committees for both FTX Australia and FTX Express on Thursday during an online meeting.

“It’s a bit rich to have the international bunch in line to get some of whatever they recover in Australia,” one creditor, based in Sydney, told The Australian Financial Review after the creditors meeting.

“It sounds like our guys are trying as hard as they can to get information out of the global business, so I’m angry to think the overseas people can come sniffing for assets over here.”

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Although investors learnt that they may not be creditors in the Australian proceedings at all, disgraced former FTX chief executive Mr Bankman-Fried defended his actions during a live interview conducted by The New York Times.

Speaking from the Bahamas, where he ran FTX, Mr Bankman-Fried dodged questions about the billions of dollars of customer money he on-lent to his trading company, Alameda Research.

‘Failed on risk management’

“I didn’t ever try to commit fraud on anyone, I was shocked by what happened this month,” Mr Bankman-Fried said, adding he didn’t “knowingly co-mingle funds” between FTX and Alameda.

“A lot of what we ended up doing and focusing on was a distraction from one unbelievably important area that we completely failed on: that was risk management.”

Tensions are running high as the FTX platform has been frozen for nearly three weeks, with Australian administrators conceeding they weren’t sure when they would have access to the technology.

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Local investors were also told on Thursday that the Australian administration process was only dealing with customers who “on-ramped” to FTX using Australian dollars.

This meant those customers who connected a personal wallet or moved cryptocurrency from another exchange to FTX were instead likely to be creditors in the global claims against FTX Trading.

“This is a very unfortunate set of circumstances,” John Mouawad, an administrator from KordaMentha, told creditors during the meeting.

“We are very conscious of the impact this has had on customers and we are really conscious of the life savings that many of you have put into the FTX trading platform, whether that be via the FTX Australian entities or directly into FTX Trading.”

Administrators have unearthed $42 million in bank accounts linked to the local FTX operations, and are chasing another $700,000 more.

Neither FTX Australia nor FTX Express controlled or operated digital wallets themselves.

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Cosmos closure

It is a busy time for KordaMentha, which has also been appointed voluntary administrators to North Sydney-based Cosmos Asset Management. The crypto firm came to prominence after listing Australia’s first cryptocurrency exchange-traded fund.

Anthony Miskiewicz and Catherine Conneely of KordaMentha were appointed to the crypto investment firm on November 24, according to an insolvency notice lodged with the corporate regulator.

The administration comes one month after Cosmos announced it was de-listing its bitcoin and ethereum ETFs from the Cboe Australia exchange.

Cosmos CEO and former BlackRock executive Dan Annan said at that time that investors’ money was “ring-fenced” and that the firm would “continue to follow the process in the interests of all unit holders”, hinting at an imminent administration.

It is understood Cosmos failed to achieve sufficient funds under management in its ETFs and unlisted bitcoin fund to make the business viable, given expensive insurance and custody arrangements in place for crypto managers.

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The company controlled assets of about $1 million in September. The ownership of Cosmos before its administration was unclear.

The Financial Review revealed last month that its former owner, Nasdaq-listed Mawson Infrastructure, had quietly written down the value of Cosmos to zero and transferred ownership to a third party, believed to be Toronto-based Purpose Investments.

But in a statement, Purpose Investments denied it was the owner of Cosmos. A Cosmos spokesman declined to comment, directing questions to KordaMentha.

Jessica Sier writes on technology, internet culture, cryptocurrencies and software from our Sydney newsroom. She has previously covered global capital markets and economics. Connect with Jessica on Twitter. Email Jessica at jessica.sier@afr.com
Aleks Vickovich leads the Financial Review's coverage of wealth management, specialising in the business and regulation of investment markets, financial advice and superannuation. Email Aleks at aleks.vickovich@afr.com

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