ASIC suspends FTX Australia's license as fallout continues

ASIC suspends FTX Australia’s license as fallout continues

The exchange, which was among the world’s largest, filed for bankruptcy protection on Friday in one of the most high-profile crypto explosions after traders withdrew $6 billion ($9 billion) from the platform and the rival exchange in three days Binance abandoned a bailout deal.

“FTX faced a severe liquidity crisis that necessitated the filing of these cases on an emergency basis last Friday,” the court filing said.

FTX’s bankruptcy case involves more than 100,000 creditors, and that number could exceed 1 million, the filings say. The numbers were revealed when FTX required several FTX Group companies to file a consolidated list of major creditors, rather than separate ones.

The documents also confirmed that FTX had responded to a cyberattack on Nov. 11 after saying on Saturday it had seen “unauthorized transactions” on its platform.

FTX hired Alvarez & Marsal as financial advisors and said it is in liaison with the U.S. Attorney’s Office, the Securities and Exchange Commission (SEC), the Commodity Futures Trading Commission (CFTC) and dozens of federal, state and international regulators across the country last 72 hours.

The fallout has so far been limited to crypto exchanges and traders, but is also appearing in mainstream political discussions.

Michael Barr, the Federal Reserve’s top Wall Street police officer, said Tuesday he was concerned about risks from the non-bank sector, for which the Federal Reserve and other regulators have poor visibility.

“This obviously includes crypto activities, but more broadly risks in parts of the financial system where we don’t have good visibility, transparency and data. That can create risks that backfire on the financial system we regulate,” he told the Senate Banking Committee.

Crypto industry peers and partners have been quick to distance themselves from FTX and all its solid financials, although some, including US cryptocurrency broker Genesis Trading, have disclosed that they are exposed to FTX, either because they have held tokens on the exchange or because they use the Own native tokens of FTX, FTT.

FTT plunged around 94 percent last week, while Bitcoin lost 22 percent.

FTX and its sister company Alameda were run from a $40 million penthouse in the Bahamas by 30-year-old Bankman-Fried and a close circle of friends.

The Wall Street Journal reported that crypto lender BlockFi, which previously admitted it has significant exposure to FTX, is set to lay off workers as it prepares for bankruptcy. The newspaper reported that BlockFi recently worked with Kenric Kattner, a bankruptcy partner at Haynes & Boone, citing people familiar with the situation. BlockFi and Kattner did not immediately respond to a request for comment.

Separately, bankrupt crypto lender Voyager Digital is no longer planning to sell itself to FTX, Bloomberg reported, while Canadian crypto exchange Bitvo said it has canceled its deal in order to be bought by FTX.

Sam Bankman-Fried, founder and former CEO of FTX, said in a tweet on Tuesday that his primary goal is “doing what’s right for clients.”

“I contribute what I can. I personally meet with regulators and work with teams to do what we can for clients,” he said on Twitter.

Bloomberg reported that US and Bahamian authorities had discussed bringing Bankman-Fried to the United States for questioning.

Bankman-Fried tried to raise money from investors to pay back FTX clients over the weekend, even after the company filed for bankruptcy protection and he resigned as CEO, The Wall Street Journal reported.

Bankman-Fried said in an interview with The New York Times published late Monday that he had grown his business too quickly and failed to notice red flags in the stock market.

Regulatory Examination

The sudden collapse of FTX, once seen as the mainstay of the crypto industry with a valuation of $32 billion in January, has sparked investigations from financial regulators and other regulators around the world.

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The Bahamas Securities Commission said in a statement Monday that two PwC partners have been approved by the Supreme Court as joint provisional liquidators for FTX.

Several global regulators have unlicensed local FTX entities and are investigating the company, and investigations by the US Department of Justice, the SEC and the CFTC are also ongoing, a source with knowledge of the investigation told Reuters.

Some argued regulators should have acted sooner.

Ken Griffin, founder and CEO of hedge fund Citadel, told the Bloomberg New Economy Forum in Singapore: “FTX is one of those absolute travesties in the history of financial markets. Collectively, people will lose billions of dollars, and that is eroding confidence in all financial markets.”

with Reuters

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