FTX Europe Faces Extended Suspension Amid Bankruptcy Fallout

FTX Europe, the European and Middle Eastern division of the now-defunct cryptocurrency exchange FTX, faces extended suspension following a recent notice from the Cyprus Securities and Exchange Commission (CySEC).

The decision is part of ongoing regulatory scrutiny following FTX’s bankruptcy in November 2022.

According to the filing, the CySEC has decided to prohibit FTX Europe from providing investment services, accepting new clients, or advertising its offerings until May 30, 2025.

The regulator’s act comes amid ongoing scrutiny and compliance issues following FTX’s bankruptcy in late 2022. The latest decision is the fourth extension since the initial suspension. The CySEC first suspended FTX Europe’s operations briefly after the exchange filed for Chapter 11 bankruptcy protection in the U.S.

More FTX Drama!

While FTX Europe is banned from engaging in new business activities, it is still permitted to complete transactions that clients initiate and return funds to existing clients. This means that customers can request withdrawals of their existing funds, but they are unable to trade or access new services.

FTX Europe was established after FTX acquired the Swiss company Digital Assets AG for over $300 million in 2021. The exchange looked to provide a regulated platform for trading cryptocurrencies and derivatives for clients in the European market.

In early 2022, the European arm won the regulatory nod from the CySEC to operate as a licensed investment firm under EU regulations. However, after eight months of operations, FTX Europe started encountering regulatory challenges.

Following the collapse of FTX due to financial mismanagement and fraud allegations against its founder Sam Bankman-Fried, the CySEC suspended its license multiple times. The suspension has left many clients with frozen accounts containing assets, including derivative positions and cash balances.

The FTX estate’s restructuring efforts include the sale of its European division as part of efforts to recover from its financial collapse. FTX Europe was reportedly sold back to its original owners, Digital Assets AG, after a legal dispute over the acquisition price.

With the latest move from CySEC, FTX Europe’s future remains uncertain. Ongoing bankruptcy proceedings may complicate efforts to resume operations.

FTX Secures $21 Million in Asset Recovery Settlements

The FTX estate is actively working to recover mismanaged assets after the exchange’s collapse.

According to a recent filing, the entity has come to terms with Evolve Bank and the Silicon Valley Community Foundation (SVCF) in settlement agreements that could facilitate the recovery of $21 million in assets. These settlements require court approval, with a hearing set for November 20.

As part of the agreement, Evolve Bank agreed to return approximately $13 million to FTX. The bank previously held the money in deposits for West Realm Shires Services Inc., an FTX affiliate.

Evolve Bank will retain a small amount for indemnification expenses and waive all claims against FTX under their Master Bank Services Agreement.

The separate settlement with SVCF will see over $8.5 million in cash and FTT tokens recovered. These assets were originally donated by former FTX executives in December 2021. By settling out of court, FTX avoids potential litigation and expedites the recovery process.

FTX has also settled a legal dispute with Bybit for approximately $228 million, allowing it to reclaim significant digital assets held on Bybit’s platform.

The latest developments come after FTX gained court approval of its repayment plan. The approved plan is expected to allow 98% of FTX creditors to receive approximately 119% of their allowed claims within 60 days of the plan’s effectiveness.

There will be approximately $14.7 billion to $16.5 billion available for distribution to creditors from the FTX estate, which includes assets recovered across the globe.

However, many customers are unhappy with the repayment plan as it does not account for the substantial appreciation in cryptocurrency values since FTX’s collapse. At the time of FTX’s collapse, Bitcoin was trading at approximately $16,000. As of now, Bitcoin has surged to around $74,673, per CoinGecko.