In the words of Joe Longo, “[FTX] bought [the AFSL] off an existing license-holder. Under current statutory arrangements, it is a normal thing to do. We were notified about that position, but it is very easy to trade someone else’s license.”
A report by the Australian Financial Times claimed that a regulatory loophole allowed FTX to acquire the Australian Financial Services License (AFSL).
FTX Australian began operating earlier this year after obtaining the AFSL from the Australian Securities and Investments Commission (ASIC). However, the ASIC Chairman, Joe Longo, revealed that FTX’s Australian subsidiary acquired the AFSL by purchasing local firm IFS Markets in December 2021. This granted FTX Australia access to IFS Markets’ AFSL, thus allowing it to bypass a series of regulatory checks.
Longo pressed for amendments to be made to the corporate law which made it easy for companies to secure ASFLs. ASIC members added that trading ASFLs was a common occurrence, with hundreds of these licenses sold every year.
Furthermore, the ASIC lacks the authorization to investigate FTX under the existing corporate law. Senator Deborah O’Neill also cautioned against the risks associated with allowing companies to acquire the ASFL without undergoing any regulatory tests, adding,
“In addition to trading of crypto in and of itself, just because you have an AFSL ticked off by ASIC, there is no guarantee there is integrity?”
Recently, the ASIC suspended FTX Australia’s license until May 2023. In the official document, the regulatory body noted that the exchange can continue to provide limited services pertaining to termination of clients’ existing derivatives till December 19.
