The Financial Services Agency, or FSA, of Japan has requested FTX Japan suspend business orders, citing the policies of FTX Trading Limited.
In a Nov. 10 announcement, the FSA said it had taken administrative actions against FTX Japan following FTX Trading Limited’s suspension of withdrawals “without explaining the reasons clearly to investors.” The financial regulator said it had issued suspension orders and business improvement orders in accordance with Japan’s Payment Services Act and Financial Instruments and Exchange Act.
“There have been reports that FTX Trading Limited is facing credit uncertainties,” said the FSA. “It is necessary to take all possible measures to prevent a situation in which the interests of creditors and investors are harmed by the outflow to affiliated companies of the company. Therefore, this situation of our company is not recognized as having the necessary system in place to properly carry out [its financial obligations].”
Under the orders, FTX Japan will be required to suspend over-the-counter derivatives transactions and related margins as well as new deposits from users from Nov. 10 to Dec. 9 unless the FSA steps in. The financial regulator also ordered the exchange to hold its asset domestically over the same timeframe, properly reporting liabilities on its balance sheet.
FSA’s business improvement order requires FTX Japan to submit a plan by Nov. 16, which includes how it intends to protect investors and provide transparency on the ongoing situation with FTX:
“Until the implementation of the business improvement plan is completed, monthly progress and implementation status shall be reported in writing by the 10th of the following month.”
Related: Japan’s crypto self-regulation ‘experiment’ not working
Formerly the Quoine Corporation, FTX Japan was launched in June by FTX to service Japanese crypto users following the acquisition of the Liquid exchange in February. FTX CEO Sam Bankman-Fried, who recently apologized for not providing transparency around the “liquidity crunch” the exchange was facing, also served as the interim CEO of FTX Japan at launch.
Though Bankman-Fried said United States-based exchange, FTX US — a separate business entity from FTX — “was not financially impacted” by the problems facing the major exchange, it’s unclear how FTX’s difficulties may impact FTX Japan’s business and operations.
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