Amid the controversies surrounding the cryptocurrency industry, a financial regulatory agency in Australia canceled the local operating license of FTX, effective on July 14.
Revoking Operating License of FTX Australia
The Australian Securities and Investment Commission (ASIC) announced Wednesday that it has canceled the Australian financial services (AFS) license held by FTX Australia Pty Ltd.
The agency said FTX Australia is operating a digital currency exchange that was not regulated. FTX Australia is a subsidiary of the bankrupt US cryptocurrency exchange FTX. According to Reuters, the cancelation of the license is effective on July 14.
Despite having its license canceled, FTX will still be allowed to offer limited financial services until July 12, 2024, specifically for the purpose of terminating existing derivatives with clients. This time allowance aims to ensure a smooth transition and to address ongoing obligations.
The ASIC noted that the license cancelation does not have any effect on the requirements for FTX Australia to continue as a member of the Australian Financial Complaints Authority. The company is also allowed to have or make arrangements for compensating retail clients.
The company is still required to adhere to follow the authority's guidelines for handling customer complaints and disputes. FTX Australia must ensure that its customers' interests are protected during the transition period despite the license cancelation.
Last November, the ASIC suspended FTX Australia's AFS license until May this year. The Guardian reported that it temporarily suspends the company from dealing in, making a market for, and providing general advice on derivatives and foreign exchange contracts to retail and wholesale clients.
FTX obtained an AFS license in December 2021 through the takeover of a company already holding a license - IFS Markets.
FTX Controversies
The dramatic downfall of FTX and its billionaire founder Sam Bankman-Fried occurred as a consequence of a cryptocurrency "bank run." It emerged when concerns regarding FTX's financial stability were raised.
Once a star of the cryptocurrency industry with a valuation of $32 billion in January 2023, FTX filed for US bankruptcy protection last November. The company noted that it could not fully repay customers who had deposited funds on its platform.
FTX had lost all of its money and investors' funds, with no one answering on the missing funds. Bankman-Fried is currently confronted with a criminal lawsuit brought against him by the US government, accusing him of engaging in fraudulent activities.
However, Bankman-Fried vehemently denied these allegations and has entered a plea of not guilty in response to the charges. The legal proceedings surrounding his case are ongoing.
Following the collapse of FTX and its subsequent bankruptcy filing, the cryptocurrency industry has been experiencing significant turbulence as it faces heightened scrutiny from regulators worldwide.
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