FTX Japan finally resumes client funds withdrawals

According to Seth Melamed, the chief operations officer, FTX Japan today launched beta testing of the balance transfer process for a randomly selected group of customer accounts.  The Japanese subsidiary will use the feedback to make the process of confirming and transferring balances “as transparent as possible” for the wider group of FTX users.

“We deeply apologize for causing great concern and inconvenience to our customers due to the long-term suspension of the service,” the company said in a blogpost on its website.

Earlier in December, FTX Japan laid out a timeline for the restoration of customer funds and resume asset withdrawals as early as February.

The exchange developed a recovery system that will enable affected users to retrieve their assets via Liquid Japan, which was the first exchange to be officially licensed by the Japan Financial Services Agency (JFSA).

The process will see FTX Japan’s customers become clients of Liquid, which acquired the client book and then conducted balance checks.

FTX completed the acquisition of Liquid Group a year ago to serve Japanese customers through its subsidiary. The FSA-regulated venue also operates a clearinghouse for fiat-backed stablecoins which facilitates swaps, FX trading, and digital fiat onramps/offramps.

The Japanese watchdog has originally ordered FTX Japan to suspend operations until December 9 and put together a “business improvement plan.” It was then given an additional three months, until March 9, to fulfil the regulator’s orders. The extension came as the exchange was still unable to return customer assets while its trading systems continue to be out of function.

Under the orders, FTX Japan suspended over-the-counter derivatives transactions and related margins as well as new deposits. It also informed users that during the suspension period, services relating to new account opening, spot trading, fiat currency deposits, incoming crypto transfers, and derivatives transactions are halted.

FTX Japan stopped client withdrawals on November 8 after Japan’s regulator ordered it to suspend services. That came shortly after its parent entity fell into a dramatic liquidity crisis that reportedly required $8 billion to resolve. But three days later, FTX’s founder Sam Bankman-Fried filed for Chapter 11 bankruptcy protection in the US.

The Kanto bureau also ordered the exchange to hold its assets domestically over the same timeframe, properly reporting liabilities on its balance sheet. The regulator said that the exchange does not have the necessary structure to provide crypto exchange services in a manner deemed appropriate under the Japanese standards.