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FTX was Under Surveillance in Australia Months Before Collapse, Says Report




FTX was under the surveillance of Australian regulators months before its spectacular collapse in November 2022.

According to a report by The Guardian on Sunday, January 29th, documents seen revealed that Australian financial regulators raised flags about the operations of FTX’s local entity just after it began offering its operation in March 2022.

The report says that the Australian Securities and Investments Commission (ASIC) issued three notices to FTX Australia between March 2022 and November, asking for more clarity on its operations and business practices. A document dated November 11—the day FTX filed for bankruptcy protection—confirms that regulators had the company under its active surveillance since March.

A Risky Offering Sparked Concerns

According to the report, FTX acquired its Australian financial services license (AFSL) in December 2021 by taking over a financial firm IFS Markets, which already had the license. This allowed the crypto exchange to circumvent some of the strict requirements for an AFSL license.

FTX began its operations in mainland Australia in March 2022. Just days after, the company became the subject of regulator review as, according to a Financial Review publication, it claimed to allow users to buy crypto assets with “margin loans up to 20 times their investment.

Concerned over this offering, the licensing authority sought to review “the businesses proofs FTX provided” as part of the license application. But no such information was available as the license was secured via a takeover.

As per obtained documents, the regulator issued an s912C notice in March, asking FTX to provide documents about its operations for ASIC “to assess whether the business is fit and proper to hold the AFSL.”

Claims and noticing agents such as Kroll are often assigned to bankruptcy cases where the number of creditors exceeds a thousand.

FTX also held a phone meeting with ASIC on March 30, reiterating its seriousness about the regulations and promising to provide transparency and work with the Australian federal police to fight crypto crimes.

The regulator continued to have concerns about FTX as late as October. ASIC issued three notices to FTX until it put its local entities into voluntary administration in November following its bankruptcy filing in the US. In response to these notices, FTX continued to tell the regulator that it was “compliant with its financial requirements.”

Reports say that FTX Australia was one of more than 130 FTX-linked companies that halted operations in the country following the parent company’s bankruptcy filing.

It was still under surveillance activity” at the time that external administrators were appointed to the Australian FTX entities. Following its bankruptcy filing, its AFSL was suspended on November 16. the exchange owed around $1 million to 30,000 Australian customers.

FTX bankruptcy case is ongoing, and big revelations are coming out of the box. Amid all this, as reported, Sam-Bankman Fried (SBF) claimed that the FTX US was and is solvent.