ASIC revokes FTX Australia’s license.

ASIC revokes FTX Australia's license.

The Controversial License of FTX Australia

FTX Australia, the local subsidiary of the bankrupt crypto exchange FTX, has recently lost its license to operate in the Asian-Pacific country. This came as a surprise to many, as FTX Australia had been servicing around 30,000 retail clients and 132 Australian companies. The license suspension, which was initially announced in November after FTX Global declared bankruptcy, was subsequently cancelled by the Australian Securities and Investment Commission (ASIC) on July 19.

FTX Australia’s License Acquisition

One of the key factors contributing to the controversy surrounding FTX Australia’s license is the way it was obtained. Instead of receiving the license directly from the ASIC, FTX Australia acquired it through a series of takeovers. The original firm had obtained the license in 2008, and as a result, the license was not specific to its services in Australia.

According to the license, FTX Australia was authorized to deal in, make a market for, and provide general advice on derivatives and foreign exchange contracts to both retail and wholesale clients. However, the license did not explicitly mention crypto-assets or operating a crypto-asset exchange.

License Suspension and Cancellation

When FTX Global declared bankruptcy in the Bahamas in November, the ASIC wasted no time in suspending FTX Australia’s license. Initially, the license suspension was set to end by May 25, 2023, but it was later extended until July 24. Finally, on July 19, the ASIC announced the complete withdrawal and cancellation of the license, with the cancellation taking effect from July 14.

Despite the license cancellation, FTX Australia will still be able to provide limited financial services related to the termination of its derivatives service until July 12 of next year. However, the company will also need to compensate its clients, as directed by the regulator.

The Future of FTX

In the midst of these license troubles, the global FTX entity has reported a recovery of approximately $7 billion in liquid assets. However, it has also come to light that around $8.7 billion worth of customer assets were allegedly misappropriated, resulting in a shortfall of about $2 billion. CEO John Ray has stated that the search for additional assets is ongoing.

Despite these challenges, FTX may consider re-launching as an entirely new exchange. CEO John Ray mentioned that the company has already begun the process of soliciting interested parties for the reboot of the exchange. FTX’s legal team has even suggested that a new exchange could be launched by the second quarter of 2024.

It appears that Ray and the rest of the debt-restructuring team see a reboot as the best way to ensure that creditors are maximally repaid.

In summary, the controversial license of FTX Australia has been revoked by the ASIC due to its parent company’s bankruptcy. FTX Australia obtained its license through a series of takeovers, and although it had authorization to deal in derivatives and foreign exchange contracts, it did not have explicit permission to operate as a crypto-asset exchange. FTX Australia will continue to provide limited financial services until July 2023 and will be required to compensate its clients. Meanwhile, the global FTX entity is seeking to recover assets and may consider launching a new exchange in the future.

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