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.