FTX did not have permission to take on Dutch clients, says central bank
Cyptocurrency trading platform FTX did not have permission to operate in the Netherlands, the country's central bank (DNB) told Nu.nl. As such, the regulator does not know how many residents of the country have fiat or digital currencies tied up with the company, which filed for Chapter 11 bankruptcy protection in the United States last week.
An updated filing submitted on Tuesday noted that FTX could have one million creditors who are owed money. Financial news outlet CNBC said that the exchange's sister company, Alameda Research, borrowed billions of dollars in customer funds from FTX to make high-risk leveraged trades. The New York Times reported the amount was up to 10 billion dollars.
That left FTX unable to pay its users around 8 billion dollars. Many of those who kept money on the exchange have been unable to access their funds. Officially, Dutch clients should not have been recruited through marketing materials before FTX registered with the DNB.
A sell-off at FTX was triggered by the founder of rival exchange, Binance. Changpeng Zhao announced on Twitter that his company was going to liquidate its holdings in the FTX token, FTT, "due to recent revelations." That triggered a run where FTX customers began to pull their money from the exchange. Zhao then entered into talks to take over FTX, which failed during due diligence, causing more investor concern.
For now, it is unclear how many residents of the Netherlands are affected by the FTX collapse. A recent survey found that about 1.9 million Dutch people trade in cryptocurrencies. They have invested an estimated €2.2 billion in total. People over 50 years of age have generally invested around 1,360 euros on average, while younger adults average around 1,140 euros.
"But we know that some also deposit larger amounts," the DNB told Nu.nl. Currently, the regulator is involved in 23 different investigations into allegations of illegal activities at cryptocurrency firms. Six of those led to changes in company procedures. "But some companies don't give a damn," said the DNB's Steven Maijoor.
Incidentally, Binance, the world's largest cryptocurrency exchange, was also fined by the DNB back in July. The company failed to register with the Dutch authorities, which the DNB said was a "very serious" violation. It fined the firm 3.3 million euros. It also issued a warning to Binance for non-compliance in August 2021 over the issue.
