The head of the Australian Securities and Investments Commission (ASIC), Joseph Longo, has called for the closure of a regulatory gap that allowed FTX to get an Australian Financial Services License (AFSL) in the nation without the complete array of inspections.
According to the Australian Financial Review, Longo made the remarks while testifying at a joint parliament committee on businesses and financial services.
When FTX took over IFS Markets in December 2021, it purportedly bypassed the traditional process for getting an AFSL, essentially giving it access to its license. Later, in March 2022, FTX Australia commenced operations.
Longo defended his regulatory agency when questioned about how and why the regulator allowed FTX to get an AFSL while under its supervision, claiming that a regulatory gap precluded ASIC from interfering or doing the necessary inspections.
According to Longo, this gap gives ASIC no legal basis to investigate companies in the same manner that new licensees are inspected. He said:
“FTX bought [its 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.”
The recent FTX and Alameda Research catastrophe, led by the now-troubled founder Sam Bankman-Fried, was a key topic of discussion for the committee.
Senator Deborah O’Neill responded by stating that the loophole that allows the exchange to basically receive an ASIC sign-off without being scrutinized by the regulator is concerning for Australian consumers.
“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? FTX has had little or no [corporate] governance. We are talking about a real cowboy who came in, paid the price [for an AFSL] … An AFSL was ticked off for all intents and purposes from ASIC … but there is huge risk here.”
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