Bankrupt FTX’s Japanese Arm Enables Customer Fund Withdrawals

  • FTX Japan resumes withdrawals amid regulator’s overwatch.
  • Japanese Financial Regulator seen as victor amid FTX Japan’s move.
  • SBF’s spokesperson conveys SBF’s thoughts on the same.

FTX’s Japanese arm is the first among all the bankrupt cryptocurrency exchange’s groups to initiate customer withdrawals, Bloomberg reported. Customers of the subsidiary will be able to withdraw funds beginning Tuesday.

Sam Bankman Fried’s (SBF) spokesperson Mark Botnick said via email that SBF was happy to hear about FTX Japan’s move and that he expected the US arm to do the same.

SBF is “happy to see that the Japanese exchange is moving forward, and continues to maintain that the US entity can and should do the same as soon as possible,” said Botnick via email.

Customers will be able to withdraw their money from a platform called Liquid.

According to FTX Japan’s website, at the end of September, 2022 it had 10 billion yen or $74 million in net assets while cash and deposits stood at approximately 17.8 billion yen or around $130 million.

In the wake of FTX’s bankruptcy, over a million of its customers lost funds. The bankruptcy shook the industry and the crypto market saw bloodbath for some weeks. Investigations revealed that SBF had transferred nearly $10 billion (customer funds) to FTX’s research subsidiary Alameda. Immediately after its collapse, it was confirmed that at least $1 billion in customer funds were untraceable.

The Commodities and Futures Trading Commission or CFTC alleged that a significant portion of the funds transferred to Alameda (which is actually a hedge fund started by SBF) were used to repay debts.

Reopening withdrawals is the result of the Japanese financial regulator’s swift actions soon after FTX filed for bankruptcy in November last year.

Japanese Financial Services Agency or FSA had suspended FTX Japan on November 10 last year. On that day, the Japanese subsidiary had halted withdrawals. FTX Japan’s suspension was extended in December and is set to expire on March 9.

The regulator was determined to ensure that Japanese funds don’t flow out of the country – it explained after suspending FTX Japan. Accounts, withdrawals and Trading services were suspended as per the regulator’s instructions. FTX Japan was undertaking business improvement measures after submitting a plan for the same to the regulator, according to notice on its website on November 16.

While communicating with a news agency, the FSA informed that FTX Japan held the company’s assets and customers’ assets separately. The regulator had asked the company to return assets as soon as possible. However, no deadline was given.

The Japanese subsidiary of the Bahamas based FTX might be the only group that can reopen customer withdrawals.

However, the FSA has urged its counterparts from other nations to take similar actions like it. Regulatory coercion or enforcement might be seen as an effective way to ensure FTX returns customers their money after this development.

Nancy J. Allen
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