Because of a loophole, FTX was able to get its licence in Australia without full checks: ASIC’s Longo
The head of the Australian Securities and Investments Commission (ASIC), Joseph Longo, wants a regulatory loophole that lets FTX get an Australian Financial Services License (AFSL) in the country without going through the full set of checks to be closed.
According to a report from the Australian Financial Review on December 5, Longo said these things on Monday, local time, when he spoke to a joint Parliamentary Committee on Corporations and Financial Services.
The recent crash of FTX and Alameda Research, which was led by the now-in-trouble company’s founder, Sam Bankman-Fried, was one of the main things the committee looked into.
Longo defended his regulatory body when he was asked how and why the regulator let FTX get an AFSL under its watch. He said that ASIC couldn’t step in or do the right checks because of a regulatory loophole.
When FTX bought IFS Markets in December 2021, it was said that it was able to get an AFSL without going through the usual steps. This gave it access to the license. FTX Australia later began operating in March 2022.
Related: FTX says that a former US president wants $6 million to start a cryptocurrency company.
Longo said that because of this loophole, ASIC has no legal right to look into companies in the same way that new licensees are looked into.
FTX bought its AFSL from a company that already had one. “The way the law is set up now, it is normal to do that,” Longo said. “We were told about that, but it is very easy to trade someone else’s licence.”
Longo also said that ASIC had asked the previous government, which was led by Scott Morrison, to fix this regulatory gap. However, the problem was never fixed.
As it stands, ASIC can only look at a company from the back to the front when it applies for a new AFSL. This is how it can figure out if it has enough controls in place for compliance and capital.
In response, Senator Deborah O’Neill said that Australian consumers should be worried about the loophole that lets FTX get a “sign-off” from ASIC without being looked into by the regulator.
“Trading in crypto by itself isn’t enough. “Even if you have an AFSL from ASIC, there’s no guarantee that you’re honest,” he said.
“There hasn’t been much or any corporate governance at FTX.” We’re talking about a real cowboy who came in and paid the price [for an AFSL]… “Practically speaking, ASIC gave them an AFSL, but there is a huge risk here,” she said.
