The financial regulatory authority of Australia has taken a significant step by revoking the financial license of FTX Australia, a crypto exchange that had already filed for bankruptcy. On July 19, the Australian Securities and Investments Commission (ASIC) made the official announcement regarding the cancellation, which had been in effect since July 14. However, despite the license being revoked, FTX Australia will be allowed to offer limited financial services to its clients until July 12 next year as they finalize their dealings with their customer base.
The regulator has emphasized that FTX Australia still has an obligation to make appropriate arrangements for compensating its clients during this period. The crypto exchange had a substantial customer base, serving around 30,000 retail clients and 132 local companies. This has raised concerns about the potential financial impact on these clients and the need for proper restitution.
The problems for FTX Australia began in November of the previous year when ASIC initially suspended its Australian Financial Services (AFS) license. This license allowed the exchange to offer derivatives and foreign exchange contracts to local clients. The suspension came just days after FTX’s parent company, based in the Bahamas, filed for bankruptcy on November 11, 2022.
FTX troubles
In response to the bankruptcy, voluntary administrators from the reputable Sydney-based investment and advisory firm, KordaMentha, were appointed to assist in the restructuring efforts for both FTX Australia and one of its subsidiaries, FTX Express. The aim was to assess the financial situation and find ways to mitigate the damage caused by the bankruptcy.
A recent report submitted to a U.S. bankruptcy court by the restructuring chief for FTX’s global entity revealed that approximately $7 billion in liquid assets had been recovered. However, a staggering $8.7 billion worth of customer assets were allegedly misappropriated, further adding to the complexities of the situation. The misappropriation of customer assets has raised concerns about the security of funds held by crypto exchanges and the importance of robust regulatory oversight.
Despite its troubled past, there is speculation that FTX may not entirely disappear from the market. Reports suggest that the exchange’s restructuring team has been in discussions with potential investors interested in financially supporting a reboot of the exchange as an entirely new exchange. If successful, this could allow the exchange to rise from the ashes and rebuild its reputation, provided it adheres to strict regulatory compliance and ensures the security of its client’s assets.
