Purchased by FTX with Japanese regulatory licenses in place, FTX Japan announced that its customers' funds were safe and separate, and will be returned shortly.
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FTX Japan has announced plans to restart withdrawals in "short order" — marking a second firm of Sam Bankman-Fried's imploded crypto empire to avoid bankruptcy.
Formerly known as Liquid, the Japanese derivatives exchange was already heavily regulated by Japan's Financial Services Agency (FSA) when FTX acquired it in February.
As a result, there was apparently no commingling of its funds with Bankman-Fried's trading firm Alameda Research.
Between that and how its assets are held under Japanese law, the firm said it had been "able to confirm with the law firm representing the FTX group in the Chapter 11 bankruptcy proceedings that Japanese customer cash and cryptocurrency should not be part" of that process.
It added that FTX Japan customers' assets were kept in offline cold wallets, and the private keys "are solely under the control of the Japan operations team."
The FSA had ordered it to stop accepting deposits and freeze all withdrawals — including to other parts of FTX — on Nov. 10, shortly after FTX halted them companywide "without explaining the reasons clearly to investors," the FSA said.
This was, it added, "to prevent a situation in which the interests of creditors and investors are harmed by the outflow to affiliated companies of the company."
FTX Japan is the second firm in the FTX Group — which includes FTX, FTX US, Alameda Research and as many as 130 other smaller companies — to come out of crypto's biggest collapse with its customers' funds apparently intact.
The other is FTX US Derivatives, a derivatives exchange for the company's American customers. Like FTX Japan, it was a going concern when Bankman-Fried's company bought it, and fully regulated by the Commodity Futures Trading Commission (CFTC).
As a result, it was "walled off" from the rest of FTX and its funds untouched by Alameda, CFTC Chairman Rostin Behnam told a Senate hearing this week, citing it as proof that crypto regulations do work.
As for FTX Japan, the firm has said its primary goal has been to work with the FSA and FTX's lawyers to re-enable withdrawals. With the U.S. legal team onboard, plans to do so as soon as possible.