FTX Japan Ordered by Regulator to Suspend Operations Following Withdrawal Halt
Japan's Financial Services Agency has ordered FTX's local unit to suspend operations, according to an official announcement made on Thursday.
The regulator wants FTX Japan to halt the crypto asset exchange business and stop accepting new customers until Dec. 9, 2022 effective immediately, the order said.
The order comes as Sam Bankman-Fried's international cryptocurrency exchange FTX continues its downward spiral after it suffered a liquidity crunch following a CoinDesk article scrutinizing its financials. Although rival exchange Binance initially agreed to acquire it, Binance has since backed out of a possible buyout.
In its order, the FSA cites the fact that FTX Japan halted withdrawals for customers in the country without specifying a date for reinstatement and without stopping the onboarding of new customers to the platform. CoinDesk was told early Thursday by a source that FTX Japan had indeed halted withdrawals. Under the circumstances, the regulator said it is uncertain about FTX Japan's health.
"It is necessary to take all possible measures to prevent a situation in which [Japanese customers' assets] are leaked to a [foreign] affiliated company," the order said.
The FSA's suspension order is accompanied by a "business improvement order" which requires FTX Japan to accurately identify users, strive to protect users' assets and "appropriately disseminate information to users regarding the protection of their assets."
FTX Japan is also required to submit a "written business improvement plan" for fixing the cited issues by Nov. 16, 2022.
A person familiar with the matter told CoinDesk this may be a first for Japanese regulators.
CoinDesk has reached out to FTX Japan and the FSA for comment but they had not responded by press time.
Lavender Au contributed reporting.