FTX Japan to Go Into 'Close-Only' Mode Following Regulator's Order to Suspend Operations
The Financial Services Agency had ordered the local arm of Sam Bankman-Fried's crypto exchange to halt operations until December following a withdrawal halt.
FTX Japan said Thursday it is going into "close-only" mode, meaning users will only be able to close out existing positions but not initiate new ones, following an official order earlier in the day by Japan's Financial Services Agency to suspend operations.
FTX announced its plans in a tweet, adding that FTX Japan "is a separate entity that strictly follows the Japanese regulation on asset segregation."
The FSA said it wanted FTX Japan to halt its crypto asset exchange business and stop accepting new customers until Dec. 9, effective immediately.
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 the financials of its sister company, Alameda Research. Although rival exchange Binance initially agreed to acquire FTX, 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 while it continues to enlist new customers. A source told CoinDesk that FTX Japan had indeed halted withdrawals. Under the circumstances, the regulator said it was 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.
A person familiar with the matter told CoinDesk this may be a first for Japanese regulators.
FTX Japan and the FSA didn't immediately respond to requests for comment.
Lavender Au contributed reporting.
UPDATE (Nov. 10, 20:51 UTC): Updated with information that FTX Japan said it was going into "close-only" mode.
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