The FTX bankruptcy incident is still continuing. For small and medium-sized creditors, due to the limited amount of funds and lack of legal expertise, they have nowhere to turn to and the road to rights protection is long.

Recently, a non-profit public welfare project was born to help FTX users affected by the disaster, called FixDAO, organized by the Mask Network team. The project hopes to bring together FTX creditors to negotiate with lawyers, Delaware courts, investment banks, auditors and other parties with a unified voice. "We hope to represent East Asian users, deeply participate in the legal proceedings of the Delaware Bankruptcy Court in the United States, occupy a seat at the table, and gain a certain voice, so as to better protect the vital interests of FTX victims."

Odaily Planet Daily also had a conversation with the two initiators of FixDAO, Cosmeticfish (FixDAO global coordination director) and Pinguis (legal director).

Cosmeticfish said that there is no threshold to join FixDAO, as long as you are an FTX creditor. However, there will be some requirements for DAO members. FixDAO has set up a contribution point mechanism, and rewards (contribution points) can be obtained by completing specific work; the contribution points obtained will be related to the final debt income. In terms of governance, voting rights will be determined according to the size of the debt in the future. For example, if you have a debt of $1, you will have one vote.

Pinguis said that the total amount of debt collected by FixDAO is currently about US$200 million, mainly from large investors and project parties. In the future, he hopes to attract more retail investors and small and medium-sized investors to join.

The following is the transcript of the conversation, compiled by Odaily Planet Daily.

1. FixDAO aims to help FTX East Asia creditors

Odaily Planet Daily: First of all, could you please give us a detailed introduction to FixDAO? When was it founded, by whom, and what is its goal or objective?

Cosmeticfish: FixDAO is a public welfare project officially launched at the end of November this year. It is organized by the Mask Network team and its main purpose is to help East Asian users affected by the FTX accident.

We hope to represent East Asian users, deeply participate in the legal proceedings of the Delaware Bankruptcy Court in the United States, occupy a seat at the table, and gain a certain voice, 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 that is about to enter the legal process, so our operation is more serious and rigorous.

Our goal is to get more disaster-stricken users in Asia to join us. Therefore, we may do more publicity in the next few months to let more users know us, understand us, and join us.

Odaily Planet Daily: How does FixDAO carry out its work specifically? Can you introduce the rights protection process?

Pinguis: Currently, FixDAO has officially opened registration for members. All FTX creditors can register to become FixDAO members. The registration form has been published on our Twitter homepage (https://twitter.com/fix_dao). Before filling out the application, please first read the FixDAO Charter (click to jump) to understand our organization and operation; secondly, you need to sign the FixDAO Membership Agreement (click to jump) to authorize FixDAO to participate in court as your actual agent to handle FTX-related debts.

I have also seen some people questioning our model, but only by signing these legal documents and obtaining authorization can we protect the rights of our members on behalf of our members; if we do not obtain permission from the victims, we will not be able to continue to cooperate with the law firm, let alone speak for the victims.

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

At present, 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 FTX creditor information and studying legal strategies. We have not found a suitable law firm in mainland China yet, and you are welcome to contact us if you are interested.

Odaily Planet Daily: I have a question about FixDAO’s positioning. Is FixDAO deeply involved in debt compensation as a lawyer, or is it acting as an intermediary to connect with US law firms?

Cosmeticfish: You can imagine FixDAO as an organization (society) that brings together all creditors to negotiate with lawyers, Delaware courts, investment banks, auditors, etc. with a unified voice. However, our organization is run in a decentralized manner, and the members of the organization are FTX victims in Asia.

More importantly, under U.S. bankruptcy law, if you collect enough claims, you are likely to join the creditors' committee; once you join the creditors' committee, you can participate in the implementation and formulation of the bankruptcy reorganization plan. In other words, you can get some plans that are favorable to you at the negotiation table.

Odaily Planet Daily: You just mentioned the creditors committee. As far as I know, an official FTX creditors committee with 9 members was formed at the beginning of this month, including GGC, market makers Wintermute, Wincent, Pulsar Global, etc. What are the criteria for joining the creditors committee? Are its members fixed? Does FixDAO have the opportunity to join it?

Cosmeticfish: The members of the creditor committee can be changed. You can apply to join or withdraw. Of course, the creditor committee in the United States is different from that in China. China has a fixed ratio, and you can automatically join if the debt ratio reaches a certain level; this is not the case in the United States. Looking at previous precedents, basically 5% can become a member of the creditor committee.

However, the bankruptcy liquidation in the cryptocurrency industry is different from traditional bankruptcy liquidation. There are many creditors in the cryptocurrency industry, but no creditor has a particularly large debt scale. For example, those who have become members of the creditors committee do not all have a debt ratio of 5%. From this perspective, FixDAO still wants to invite more creditors to join us in the future. Whether it is the total debt or the number of creditors, the probability of entering the creditors committee will be greatly increased.

2. Small and medium creditors can join FixDAO with zero threshold

Odaily Planet Daily: Are there any conditions for creditors to join FixDAO? What do creditors need to do after joining? Can you tell us about the governance of FixDAO?

Cosmeticfish: Let me emphasize that there is no threshold to join FixDAO, as long as you are an FTX creditor.

It should be noted that we have some requirements for DAO members. We hope that you can make some contributions to the organization and promote some work. Because we are a decentralized organization, the FixDAO Management Committee cannot do everything.

Therefore, in FixDAO's Charter, we set up a contribution point mechanism, and rewards (contribution points) can be obtained by completing specific tasks. The contribution points you get will be related to the final debt income. For example, your debt is $1 million, but if your contribution points are large enough, you can eventually get $1.2 million or even $1.4 million in debt from the debt pool. These users with high contribution points should be rewarded because they help the entire FixDAO and East Asian creditors to gain more rights and interests.

Regarding the specific contribution points and work settings, FixDAO members need to make proposals to improve them. Everything is achieved by the community through decentralized governance, and it is not something that a few of us initiators can decide on a whim.

Odaily Planet Daily: The FixDAO governance process involves voting, so how to determine the voting rights of creditors of different sizes?

Cosmeticfish: According to our idea, voting rights can be determined according to the size of the debt. For example, if you have a debt of $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. They will not vote against themselves, which is different from large and small shareholders. Of course, this is also the current idea. We are also soliciting opinions from all parties, and ultimately we still need to make improvements through proposals.

Odaily Planet Daily: Do you need to register your real name to apply to become a member of FixDAO? Some users or project owners may not want to expose their privacy. How does FixDAO achieve this?

Pinguis: When applying to become a member of FixDAO, users only need to submit their FTX username, and no real name is required. Throughout the governance of FixDAO, you will not be required to verify your real name. However, when the information is finally submitted to the bankruptcy court, your real name is required, which is also a legal requirement. In summary, only the lawyers and courts in the United States know your true identity. No one inside FixDAO, including several of us initiators, knows your real information.

Odaily Planet Daily: Many users have reported that their KYC identities at FTX were purchased. Can they participate in FixDAO to protect their rights?

Pinguis: Even if your identity is purchased, it does not mean that your debt will disappear. The United States will have a special bankruptcy lawyer to help you follow up on this matter, such as submitting relevant evidence to prove account ownership. As everyone knows, American lawyers are very "creative" and can always find a way to solve your problem, but it takes some time.

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

Pinguis: We are a non-profit decentralized organization (A non-profit DAO). Creditors only need to bear the legal fees. As the initiator, we do not charge any fees. Mask Network founder Suji Yan also tweeted that he would not take a penny from the debt pool taken back by FixDAO.

Cosmeticfish: The operation and maintenance funds of the entire FixDAO come from two parts: one is institutional donations, such as Mask Network providing us with tokens worth equivalent to US$10,000, and many projects are also contacting us; the other is advance payments by large creditors, such as users whose debt scale ranks more than 84%. This is also to take care of small creditors and lower the threshold for them to join; institutional donations and funds advanced by large creditors constitute the Operation Treasury.

The attorney fees are mainly divided into two parts. First, Operation Treasury pays part of the attorney fees at the moment of signing the contract. Second, after all legal procedures are completed, a certain proportion will be taken from the final Settlement Treasury debt pool.

In general, our fees are designed to take care of small and medium-sized creditors. They do not have to pay any fees in the early stages. Only when the case is over, if our treasury cannot bear all the costs, will we pay the attorney fees in proportion to the creditor pool, so that they will not feel too much pain.

Odaily Planet Daily: 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 exit FixDAO by providing written notice to the Management Committee and paying the professional fees you owe (such as attorney legal costs) to the FixDAO Finance Department in the equivalent amount of USDT.

3. FixDAO Debt Scale and Future

Odaily Planet Daily: How big is the current scale of FixDAO? Can you introduce the situation of creditors?

Pinguis: The total amount of creditors we have collected is about 200 million US dollars, mainly large investors and project parties, and the largest single amount is more than 10 million US dollars. We have received relatively few applications from retail investors and small and medium-sized investors, which is quite regrettable. 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 visibility (to attract small and medium-sized creditors).

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

Pinguis: Actually, we cannot predict the final effect of this matter. If we refer to Mt.GOX, it may take five to eight years, and the fastest may be two to three years. At present, there are only these two major cases of CEX bankruptcy, and there is still a lot to explore in practice.

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

Odaily Planet Daily: Currently, FTX debt is attracting the interest of some large companies in the distressed asset investment community. Companies such as Baupost Group and Oaktree Capital are seeking to act as FTX compensation brokers. Will FixDAO cooperate with these institutions? Which institutions are interested in FixDAO's debt?

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

Currently, the purchase price of FixDAO debt varies, ranging from 20% to 30% of the face value. It was only 5% at the beginning, and then as more FTX hidden assets were exposed and SBF was arrested, the purchase price also rose.

Odaily Planet Daily: Finally, please give us a summary. Why do small and medium-sized creditors want to join FixDAO? What are your resource advantages?

Cosmeticfish: For small creditors, they certainly don’t know or know which law firm is strong enough, especially the law firm must understand Web3, understand FTX’s bankruptcy, and have strong strength. As the initiator of FixDAO, we have been deeply involved in the legal circle and Web3 for many years and have rich experience. Moreover, we are a non-profit organization, and we just want to help East Asian creditors safeguard their vital interests.

At present, we have called together professional law firms from the United States, Singapore, Japan, South Korea and other countries or regions to serve the victims, including Wollmuth Maher, Bird & Bird, Enlighten Law Group, etc. Therefore, our overall legal resources are very good.