• The Australian Securities and Investments Commission (ASIC) had internal discussions about FTX’s planned debut in Australia in March 2022.
• ASIC issued FTX a Section 912C notice in the same month, requiring the crypto exchange to disclose information on its activities and determine if it meets the requirements for an AFSL license.
• FTX obtained its AFSL in December 2021 by acquiring IFS Markets, ahead of its planned launch in March 2022.
The Australian Securities and Investments Commission (ASIC), the country’s market regulator, had raised red flags months before the collapse of the crypto exchange FTX. According to a recent publication by ASIC, they had internal discussions about FTX’s planned debut in Australia in March 2022. Some have expressed concern over the return on investment promises.
In response to these worries, ASIC issued FTX a Section 912C notice in the same month, requiring the crypto exchange to disclose information on its activities and determine if it met the requirements for an AFSL license. Through this notice, ASIC may have requested the licensee to provide documentation indicating the financial services offered and the nature of their financial services business to determine if they meet the „fit and suitable person“ test.
Between the initial concerns and FTX’s collapse on November 11, the exchange was placed under monitoring and received three notifications from ASIC. FTX then obtained its AFSL in December 2021 by acquiring IFS Markets, ahead of its planned launch in March 2022.
Chairman of ASIC, Joe Longo, noted that this allowed FTX Australia to bypass typical scrutiny for new AFSL licensees. The now-defunct firm committed to informing customers of fraudulent crypto transactions and cooperating with the Australian Taxation Office.
The ASIC briefing document also shows that the regulator had contacted FTX in January 2022 and again in February 2022, to request more information about the exchange’s operations. The regulator also conducted a review of FTX’s financial records, as well as its risk management and anti-money laundering procedures.
The report concluded by noting that, despite their efforts, the regulator was unable to prevent the collapse of FTX Australia, as the exchange had failed to meet the more stringent requirements of an AFSL license. The collapse of FTX has resulted in numerous customers losing access to their funds, and the exchange’s liquidators are currently investigating the matter.
In light of the collapse of FTX, ASIC has urged all crypto exchanges in Australia to ensure that they are fully compliant with the relevant laws and regulations. The regulator also noted that it will continue to monitor the industry and take appropriate action where necessary to protect consumers and the integrity of the financial system.