Exclusive interview with FixDAO: How do small and medium-sized creditors of FTX team up to defend their rights?

Author | Qin Xiaofeng

Editor | Hao Fangzhou

Produced | Odaily

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Author | Qin Xiaofeng

Editor | Hao Fangzhou

Produced | Odaily

The bankruptcy of FTX is still going on. For small and medium-sized creditors, limited by the amount of funds and lack of legal expertise, there is no way to seek help, and the road to rights protection is long.

Odaily also had a conversation with the two founders of FixDAO, Cosmeticfish (FixDAO Global Coordinator) and Pinguis (Legal Director).

Cosmeticfish stated that there is no threshold for joining FixDAO, as long as it is a creditor of FTX. However, there are some requirements for DAO members. FixDAO has set up a contribution point mechanism, and rewards (contribution points) can be obtained for completing specific tasks; the contribution points obtained will be related to the final creditor's rights income. In terms of governance, voting rights will be determined based on the scale of claims in the future. For example, if you have a debt of US$1, you have one vote.

Pinguis said that the total size of the claims that FixDAO has collected is about 200 million US dollars, mainly large investors and project parties, and hopes to call more retail investors and small and medium investors to join in the future.

Cosmeticfish：The following is the transcript of the conversation, organized by Odaily.

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1. FixDAO aims to help FTX East Asian creditors

Odaily: First, please give us a detailed introduction to FixDAO? When was it founded, by whom, and what was its goal or goals?

Pinguis：FixDAO is a public welfare project officially launched at the end of November this year, organized by the Mask Network team, with the main purpose of helping East Asian users affected by the FTX accident.https://twitter.com/fix_daoWe hope to represent East Asian users, deeply participate in the legal proceedings of the Bankruptcy Court of Delaware, the United States, occupy a place, and gain a certain right to speak, so as to better protect the vital interests of FTX victims. This is also the biggest difference between FixDAO and other DAO organizations - we are a decentralized organization in the legal process, so our mode of operation is more serious and rigorous.Our goal is to bring more disaster-stricken users in Asia to join. Therefore, we may do more publicity in the next few months to let more users know us, understand us, and join us.Odaily: How does FixDAO work specifically? Can you introduce the rights protection process?At present, FixDAO has officially opened the registration of members. All FTX creditors can register as members of FixDAO. The registration form is already on our Twitter () home page posting. Before filling out the application, please read the

FixDAO Charter (click to jump)

, to understand how we are organized and operate; second, to sign the

FixDAO Member Consent Form (click to jump)

, authorize FixDAO to attend court as your actual agent and claim for FTX-related debts.

Cosmeticfish：I have also seen some people question our model, but only after signing these legal documents and being authorized, can we defend the rights on behalf of our members; if we do not obtain the permission of the victims, we will not be able to continue to cooperate with the law firms that have settled in , and there is no way to file a claim for the victim.

At present, we have completed the contact with lawyers in jurisdictions such as the United States, Hong Kong, Singapore, and Taiwan. It is expected to complete the signing of all legal documents in January, and then we can officially enter the judicial process of bankruptcy and reorganization in Delaware.

Currently, on the one hand, we are improving the DAO charter and management methods, hoping that it will become more democratic and scientific; on the other hand, we are also collecting information on FTX creditors and studying legal strategies. We have not found a suitable law firm in mainland China yet, please contact us if you are interested.

Cosmeticfish：Odaily: I have a question about the positioning of FixDAO. Is FixDAO deeply involved in debt claims as a lawyer, or as a middleman to connect with American law firms?

More importantly, under the bankruptcy law of the United States, if you collect enough creditor's rights, you have a high probability that you can enter the creditors' committee; when you enter the creditors' committee, you can participate in the implementation of the bankruptcy reorganization plan and formulate. In other words, you can get some plans in your favor at the negotiating table.

Odaily: You just mentioned the creditor committee. As far as I know, a 9-member FTX official creditor committee has been born earlier this month, including GGC, market makers Wintermute, Wincent, Pulsar Global, etc. What are the criteria for joining the committee of creditors, is its membership fixed, and is there a chance for FixDAO to be part of it?

The members of the creditor committee can be changed, you can apply to join or withdraw. Of course, the U.S. creditors’ committee is different from China’s. China has a fixed ratio and can automatically join the creditors’ committee when the debt ratio is reached. This is not the case in the United States. Let’s look at the previous precedent. Basically, 5% can become a member of the creditors’ committee.

Cosmeticfish：However, the bankruptcy liquidation of the currency circle is different from the traditional bankruptcy liquidation. The currency circle has a large number of creditors, but there is no creditor with a particularly large debt scale. For example, those who have become members of the creditor committee have not all accounted for 5% of their debts. From this perspective, FixDAO still wants to invite more creditors to join us. Both the total amount of debt and the number of creditors will become larger, so that the probability of entering the creditor committee will be greatly increased.

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2. Zero threshold for small and medium creditors to join FixDAO

Odaily: Are there any conditions for creditors to join FixDAO? After joining, what work do creditors need to do? Can you tell us about the governance of FixDAO.

Let me emphasize that there is no threshold for joining FixDAO, as long as you are a creditor of FTX.

Cosmeticfish：It should be noted that we have some requirements for DAO members, and we hope that you can make some contributions to the organization and advance some work. Because we are a decentralized organization, it is impossible for the FixDAO management committee to do everything.

Therefore, in FixDAO's "Articles of Association", we have set up a contribution point mechanism, and rewards (contribution points) can be obtained for completing specific tasks. The contribution points you get will be related to the final debt income. For example, your claim is 1 million US dollars, but if your contribution is large enough, you can eventually get 1.2 million or even 1.4 million US dollars of claim from the claim pool. These users with high contribution points should be rewarded, because they helped the entire FixDAO and East Asian creditors win more rights and interests.

Pinguis：Regarding the specific contribution points and work settings, FixDAO members need to improve through proposals, and everything is realized by the community through decentralized governance.

Odaily: The governance process of FixDAO needs to involve voting, so how to determine the voting rights of creditors of different sizes?

Pinguis：According to our idea, voting rights can be determined according to the scale of claims. For example, if you have a debt of US$1, you have one vote. This form is very simple and easy to understand. Moreover, the fundamental interests of large creditors and small creditors are consistent, and they will not vote against themselves, which is still different from large and small shareholders. Of course, this is also the current assumption. We are also soliciting opinions from all parties. In the end, we still need to make improvements through proposals.

Odaily: To apply to become a member of FixDAO, do I need to register with my real name? Some users or project parties may not want to expose their privacy. How does FixDAO achieve this?

Pinguis：When a user applies to become a FixDAO member, he only needs to submit his user name in FTX, no real name is required. In the entire governance of FixDAO, your real name authentication will not be required. However, when the information is finally handed over to the bankruptcy court, the real name is required, which is also a legal requirement. To sum up, only the lawyers and courts in the United States know your real identity, and no one in FixDAO, including our few promoters, knows your real information.

Cosmeticfish：Odaily: Many users reported that their KYC identity in FTX was bought, can they participate in FixDAO for rights protection?

Even if your identity is purchased, it does not mean that your debt will disappear. There will be a dedicated bankruptcy lawyer in the United States to help you follow up on this matter, such as submitting relevant evidence to prove account ownership. American lawyers also know that they are very "creative" and can always find a way to solve your problem for you, but it takes some time.

Odaily: Do creditors need to pay fees to participate in FixDAO?

We are a non-profit decentralized organization (A non-profit DAO), the creditors only need to bear the legal fees, and we do not charge any fees as the initiator. Suji Yan, the founder of Mask Network, also tweeted before that he would not take a penny from the claim pool claimed by FixDAO.

Pinguis：The legal fee is mainly divided into two parts. One is that Operation Treasury pays a part of the legal fee at the moment of signing the contract; the other is to take a certain percentage from the final Settlement Treasury credit pool after all legal procedures are over.

In general, our fees still take care of small and medium creditors, they don’t have to pay any fees in the early stage; only when the case is over, if our treasury can’t bear all the fees, will the lawyer’s fees be paid proportionally in the creditor’s pool, so that they There won't be much pain.

Odaily: If creditors are not satisfied with the results achieved by FixDAO, can they withdraw?

Pinguis：FixDAO has an exit mechanism. If you are not satisfied with the final result, you can choose to withdraw from FixDAO by providing a written notice to the management committee, and pay the professional fees you owe (such as legal costs of lawyers) to FixDAO in equivalent USDT finance department.

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Pinguis：3. The scale and future of FixDAO’s creditor’s rights

Odaily: What is the current scale of FixDAO? Can you introduce the situation of the creditors?

At present, the total size of the creditors we have collected is about 200 million US dollars, mainly large investors and project parties, and the largest single transaction is more than 10 million US dollars. For retail investors and small and medium-sized investors, we have received relatively few applications so far, which is also a pity. Because the original intention of FixDAO was to help small and medium-sized investors, we also want to make more efforts in the near future to increase our popularity (to attract small and medium-sized creditors).

Cosmeticfish：Odaily: According to your estimates, how long is the entire debt recovery cycle of FTX, and how much money can creditors get back in the end?

In fact, we cannot predict what the final effect of this matter will be. If you refer to Mt.GOX, it may take five to eight years, and it may take two to three years at the earliest. At present, the entire CEX bankruptcy is just these two major cases, and there are still many things to be explored in practice.

As for how much creditor's rights will be recovered in the end, it depends on the trial of the court. According to some information we have learned, investment bank Jefferies Financial Group expects FTX creditors to recover up to 40% of their funds. This ratio, I think, is quite ideal.

Cosmeticfish：Odaily: At present, FTX claims are attracting the interest of some big companies in the non-performing asset investment community. Companies such as Baupost Group and Oaktree Capital are seeking to act as brokers for FTX claims. Will FixDAO cooperate with these institutions? Which institutions are interested in FixDAO's claims?

Some partners of Mask Network have expressed their willingness to acquire claims before, but they are only willing to acquire claims from large creditors. They are less interested in claims below $500,000, because they need to be negotiated one by one, and the whole process is very cumbersome. This is why we set up FixDAO. When we gather all creditors together, we can negotiate with these institutions with a unified voice, so as to obtain a higher purchase price.