- Four months after the collapse of crypto exchange FTX, customers of the Japanese branch can withdraw funds again.
- FTX Japan has posted weekly updates about its plan to return user assets.
- User funds were kept in cold storage due to regulatory requirements in Japan.
FTX users were left without access to their funds when crypto exchange FTX collapsed suddenly in November last year. The financial fiasco rendered the exchange unable to cover withdrawals as users scrambled to get their money back.
For Japanese clients of the bankrupt exchange, there is still hope. An FTX Japan (FTX JP) announcement made on Monday, February 20th, indicated that the exchange would allow withdrawal of both fiat and crypto, beginning at noon (GMT+9) on Tuesday, 21st.
The return of user withdrawals honors the promise made by FTX Japan in a blog post dated December 29, 2022. The statement outlined a roadmap by which the exchange intended to make customers whole again, and disclosed that user funds were being held safe in a cold wallet. The return of assets will be facilitated via direct withdrawal from Liquid, a sister exchange owned by FTX.
Japan’s strict regulation of the cryptocurrency sector seems to have played a significant role in paving the way for withdrawals to resume. The country requires exchanges to register with the Financial Services Agency, set aside ample capital reserves, and to separate customer and exchange assets.
An Ongoing Process
Leading up to Tuesday’s resumption of withdrawals, customers registered with FTX Japan have been kept informed since the collapse of the parent company.
On December 5, 2022, FTX Japan explained that the sudden collapse of the exchange had left them without access to their website and platform. After regaining control, FTX Japan began shaping its plan to provide users with access to their funds again. The December 29 blog outlined three milestones, with fund withdrawals as the final step.
- Milestone 1 called for eligible FTX Japan users to create an account with Liquid.
- Milestone 2 asked users to log into Liquid to confirm their balances and transfer assets to the FTX platform.
- Milestone 3, the commencement of withdrawals, has now been reached, and those affected by FTX’s collapse will finally be able to retrieve their funds.
The Fall of Bankman-Fried
The downfall of FTX arose when it secretly loaned around $10 billion in customer funds to sister company Alameda Research, which then lost the money attempting to defend its trading positions.
In the wake of the massive exchange’s collapse, CEO Sam Bankman-Fried had one of the largest falls from grace in crypto history. The FTX Founder, who was often regarded as a philanthropist and tech revolutionary before his arrest on December 12, 2022, said he hoped to start a new business to help pay back the victims of his collapsed business.
Bankman-Fried’s spokesman claims that the CEO was reportedly “happy to see that the Japanese exchange is moving forward, and continues to maintain that the US entity can and should do the same as soon as possible.”
On the Flipside
- A third member of FTX’s senior management has pleaded guilty, while Bankman-Fried himself maintains that he is not guilty. Nishad Singh, former head of engineering, joins former Alameda chief Caroline Ellison and FTX Co-Founder Gary Wang in admitting culpability.
Why You Should Care
Japan’s requirements for exchanges to set aside capital reserves and separate customer and exchange assets saved customer funds held in FTX Japan.
Other nations, like Hong Kong and the UK, are busy building out their crypto framework, which is expected to protect users from similar collapses.