ASIC Was Concerned About FTX’s Operations

According to a report citing documents from The Guardian Australia, ASIC officials were concerned about FTX’s business operations from March 2022, when the exchange launched in the country, until its unexpected collapse.

Recall that FTX filed for Chapter 11 bankruptcy protection in the U.S. in November after experiencing an unresolved liquidity crunch. The documents revealed that the regulator’s officials monitored FTX Australia’s business activities until the exchange went into voluntary administration following the bankruptcy filing.

The Bahamas-based crypto company obtained the Australian Financial Services License (AFSL) by acquiring an Aussie company that held one — IFS Markets. The acquisition enabled FTX to bypass the normal investigative process for new firms applying for the licence.

However, a stockpile of ASIC emails showed that officials expressed concerns about FTX’s operations. The discussion was sparked by an article from the Australian Financial Review that reported founder and former CEO Sam Bankman-Fried’s (SBF) plans for FTX’s launch in Australia.

The former CEO said FTX would allow its customers to buy cryptocurrencies with margin loans up to 20 times their investment. One ASIC analyst deemed the strategy absurd and wondered who the exchange’s advisor was.

An S912C Notice

Since the regulator could not request the standard documents required for new licensees, it issued an s912C notice. The notice required companies to provide adequate information for the ASIC to assess if they were fit and proper to hold the AFSL.

Between April and November, the ASIC issued three notices to FTX. However, the regulator refused to release the exchange’s responses to the notices because it avoided public prejudice in its enforcement activities.

Interestingly, the documents obtained showed that the ASIC continued to express concerns about FTX till late October, as two emails labelled “FTX Australia Pty Ltd — summary of current concerns” were found.

“The issues raised included pricing, FTX Australia’s compliance with ASIC’s [contract for differences] product intervention order and its on-boarding of clients. ASIC’s review of these matters was ongoing as at the time that external administrators were appointed to the Australian FTX entities,” a spokesperson said.

~ By William A. Frederick ~