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.

AccessTimeIconNov 10, 2022 at 2:45 p.m. UTC
Updated Nov 10, 2022 at 8:51 p.m. UTC

Sandali Handagama is a CoinDesk reporter with a focus on crypto regulation and policy. She does not own any crypto.

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.


DISCLOSURE

Please note that our privacy policy, terms of use, cookies, and do not sell my personal information has been updated.

The leader in news and information on cryptocurrency, digital assets and the future of money, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups. As part of their compensation, certain CoinDesk employees, including editorial employees, may receive exposure to DCG equity in the form of stock appreciation rights, which vest over a multi-year period. CoinDesk journalists are not allowed to purchase stock outright in DCG.

CoinDesk - Unknown

Sandali Handagama is a CoinDesk reporter with a focus on crypto regulation and policy. She does not own any crypto.

CoinDesk - Unknown

Sandali Handagama is a CoinDesk reporter with a focus on crypto regulation and policy. She does not own any crypto.