Australian Authorities Raised Alarm Over FTX Months Before Its Collapse

Australian regulators mandated that FTX Australia reveal details guiding its business operation before its collapse.

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  • FTX was under surveillance by Australian authorities six months before its collapse. 
  • Aussie regulators required FTX to disclose information about how it operated its business in Australia.
  • As a result of FTX’s collapse, its Australian branch ceased withdrawals on November 11. 
  • The collapse intensified the effect of the crypto winter on projects and investors.

Regulators in Australia questioned the business practices of bankrupt cryptocurrency exchange FTX just a few weeks after it commenced operation in the country and six months before its eventual collapse.

According to a recent report by The Guardian, the Australian Securities and Investments Commission (ASIC) issued three notices to FTX between April to October 2022. 

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Aussie regulators issued an s912C notice to the cryptocurrency exchange in April 2022. Consequently, ASIC mandated that FTX Australia reveal details guiding its business operation to determine if FTX is fit to obtain the Australian Financial Services License (AFSL). The notice emanated as the ASIC doubted the processes that certified FTX to operate in the country. 

Similarly, the report also established that the prices of crypto assets on FTX  worried the regulators in the country. The cryptocurrency exchange reportedly offered customers margin loans up to 20 times their investment, which concerned authorities.

Other issues that prompted the ASIC to monitor the activities of FTX include the onboarding of users and the firm’s compliance with its product intervention order.

Recall that in December 2021, FTX acquired the AFSL before commencing operations in March 2022.

Highlights of FTX’s Collapse

In the wake of the collapse of FTX, its Australian branch ceased withdrawal on November 11. Following the collapse, the ASIC withdrew the operational license of FTX, commencing an investigation on the cryptocurrency exchange for “suspected contraventions of corporations legislation.” 

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The collapse of FTX fueled the severity of the crypto winter on projects and investors in the industry. The demise of FTX affected more than 130 firms, including FTX Australia. According to Chainalysis, about $9 billion is in the crosshairs with FTX as creditors are pushing to reclaim their assets via legal filings.

In a positive development, reports indicated that Japanese users of FTX are likely to access their funds early this year. In a blog post on Dec. 29, the Subsidiary of FTX in Japan disclosed a roadmap that will assist users in reclaiming their assets through direct withdrawal from Liquid, a sister cryptocurrency exchange owned by FTX.

On the Flipside

  • As of now, cryptocurrency is yet to be regulated in Australia. However, FTX was operating in the country after obtaining an Australian Financial Services License (AFSL) by acquiring a company that already had one.

Why You Should Care

The FTX crisis began after Binance announced the sale of its share of FTT tokens. However, few knew of FTX’s business model, which led to its collapse last November. The recent reports indicate that Australian authorities were skeptical about the firm’s activities shortly after it began operations in the country.

 

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This article is for information purposes only and should not be considered trading or investment advice. Nothing herein shall be construed as financial, legal, or tax advice. Trading forex, cryptocurrencies, and CFDs pose a considerable risk of loss.

Author
Soumen Datta

Soumen has been a dedicated researcher and writer in the field of cryptocurrencies for the last few years. Even though Indian crypto regulations are still unclear, he believes that India will continue to innovate in the years to come. He loves to play his guitar and sing along in his spare time. He holds bags mostly in BTC, ETH, BNB, MATIC, ADA.