Remember
FTX? The European branch of the once-popular cryptocurrency exchange that
became the center of a major scandal in 2022 has just been acquired. Backpack
has become the new owner of FTX EU.
Although Backpack
currently ranks only 200th in CoinMarketCap’s cryptocurrency exchange rankings
by daily trading volume, it hopes to expand its operations through the
acquisition of this MiFID II-regulated entity. However, this move might not
happen as quickly as anticipated.
Backpack Acquires Defunct
FTX EU for MiFID II License
Since
September 2022, FTX EU has held a Cyprus Securities and Exchange Commission
(CySEC) license, allowing it to passport its services throughout the European
Union under MiFID II regulations.
According
to a press release from Backpack, the acquisition has received approval from
both the bankruptcy court and CySEC. The exchange has ambitious plans,
including introducing crypto derivatives and perpetual futures to the European
market, which are currently unavailable through regulated exchanges locally.
“As
many international exchanges exit the European Union, becoming a MiFID
II-licensed entity demonstrates our dedication to meeting the highest
regulatory standards and is a significant step to bringing transparent, secure,
and regulated crypto trading to an underserved European market,” commented
Armani Ferrante, CEO of Backpack Exchange.
However,
the challenge lies in CySEC’s suspension of FTX’s license following its
collapse, with the suspension being regularly renewed. The most recent
extension of the Cyprus Investment Firm (CIF) license suspension was issued on
November 5.
While the
company claims that license reactivation is underway and plans to launch
Backpack EU in Q1 2025, official CySEC documents indicate the suspension will
last until May 30, 2025, extending into Q2.
During this
period, the company cannot provide any investment services or accept new
clients. The regulator only permits the return of funds to clients affected by
the exchange’s collapse.
Moreover, Backpack
assumes responsibility for settling FTX bankruptcy claims from previous
platform clients.
“Customer
restitution is a crucial step to rebuild trust and confidence in the industry,
and Backpack is committed to returning FTX EU customers’ funds as fast and as
safely as possible,” added Ferrante.
Although
not among the largest platforms, Backpack secured $17 million in Series A
funding round earlier this year, reaching a total valuation of $120 million.
Moreover, it succeeded in completing an acquisition that reportedly attracted
interest from a much larger player, Coinbase, in late 2023.
Loading…- Futures.- Spot-margin.- Borrow lend.- Cross collateral.- Cross margin.- Auto lend.- Auto realize.- Yield on collateral.- Yield on unrealized pnl.- Yield on everything.All inside your simple, isolated subaccount.🧱
— Backpack 🎒 (@Backpack) January 4, 2025
History of FTX’s Collapse
The FTX
cryptocurrency exchange’s dramatic collapse unfolded over ten days in November
2022, triggered by a CoinDesk report revealing questionable financial practices.
The investigation exposed that Alameda Research, FTX’s sister trading firm,
held a significant portion of its assets in FTT, FTX’s own exchange token.
The
revelation of Alameda’s holdings sparked a crisis of confidence, leading to:
- A mass
exodus of customer funds - An $8
billion shortfall in accounts - Blocking of
customer withdrawals on November 8, 2022 - Chapter 11
bankruptcy filing on November 11, 2022
Sam
Bankman-Fried, FTX’s founder, was convicted and sentenced to 25 years in prison
for misappropriating $8 billion in customer deposits. John J. Ray III, known
for managing Enron’s bankruptcy, took over as CEO and discovered what he
described as “a complete failure of corporate controls.”
FTX
announced in January 2024 that it would not restart operations but instead
liquidate assets to repay customers. The reorganization plan approved in
October 2024 will provide 98% of creditors with 119% of their allowed claims
from November 2022.
Prior to
its collapse, FTX had established FTX Europe in March 2022, securing initial
approval from CySEC and the full CIF license in September.
This article was written by Damian Chmiel at www.financemagnates.com.
Source
