Australian Regulator had Concerns Over FTX Months Before Collapse
- Australia’s financial regulator raised concerns over some products offered by FTX Australia shortly after it began operating in the country.
- Internal documents show the regulator requested information from the exchange three times, and that FTX Australia was under “surveillance activity” prior to its collapse.
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The Australian Securities and Investment Commission (ASIC) had concerns over FTX’s local subsidiary eight months before the cryptocurrency exchange filed for bankruptcy, The Guardian Australia reported on 29 January.
According to documents published through a freedom of information request by the news outlet, ASIC started looking into FTX Australia and its operations in the country in March 2022. What set the alarm off for the financial regulator was an article from the Australian Financial Review that covered the launch of FTX Australia, claiming the exchange would allow its customers to buy crypto with margin loans up to 20 times their investment. A spokesperson for ASIC told The Guardian:
“Since March 2022, ASIC had made enquiries with FTX Australia about the financial products offered by FTX Australia. The issues raised included pricing, FTX Australia’s compliance with ASIC’s [contract for differences] product intervention order and its on-boarding of clients.”
One of the biggest points of concern for ASIC was that FTX Australia was able to bypass its normal licensing procedures by acquiring IFS Markets, a company that already held the Australian Financial Services Licence (ASFL). As such, the regulator issued a Section 912C notice to FTX, requesting the exchange to provide information about its business and allow ASIC to determine if it it meets AFSL license conditions.
In the following months, the financial regulator issued three more notices to FTX Australia asking for further information about its operations, with internal emails revealing ASIC was concerned about the exchange as late as October. A document dated 11 November — the day FTX filed for bankruptcy — also revealed that ASIC had already put the exchange under “surveillance activity”.
FTX Australia was amongst the over 130 FTX-connected companies to pause operations after its parent company went into bankruptcy proceedings, and is currently voluntary administration that is similar to Chapter 11 bankruptcy in the U.S.. It is estimated that FTX Australia owes money and crypto to around 30,000 customers and 132 companies in the country.
- SVB Financial Group has filed for a Chapter 11 court-supervised reorganization in the U.S. in order to “preserve value”.
- The company stressed it is no longer affiliated with Silicon Valley Bank, the closure of which sent ripples across the crypto industry.
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- A bankruptcy judge has denied the government’s request to halt the deal between Voyager and Binance, arguing that further delays would only harm customers.
- The government argued the deal should be amended, or struck down, because it seeks to effectively absolve Voyager and its staff of violations of tax or securities law.
- Bankruptcy Judge Michael Wiles gave Voyager the permission to close its $1 billion deal with Binance.US, and issue repayment tokens to affected customers.
- Judge Wiles also rejected the SEC’s arguments that the deal could potentially violate U.S. securities laws, and criticized the regulator for attacking the sale without first concluding if it was illegal.