The European arm of a well-known cryptocurrency exchange recently faced major turmoil but has now undergone an acquisition. The new entity stepping in is Backpack, which aims to leverage the exchange’s MiFID II license to expand its operations, despite its current lower ranking in daily trading volume.
FTX EU previously operated under regulations set by the Cyprus Securities and Exchange Commission (CySEC) and had been granted a license allowing it to provide services across the European Union. Following the acquisition, which has received necessary approvals from relevant regulators, there are plans to enhance offerings by introducing crypto derivatives and perpetual futures, which are currently not available through other regulated exchanges.
The ongoing challenge lies in addressing the previous suspension of the license due to the exchange’s notorious collapse. This suspension was put in place after events in late 2022 led to a loss of client confidence and a significant shortfall, resulting in blocked withdrawals and a subsequent bankruptcy filing.
During the bankruptcy proceedings, the new owner of the exchange will assume responsibility for resolving lingering claims from former clients affected by the collapse. They have made an explicit commitment to return funds as quickly and safely as possible, aiming to restore trust within the industry post-scandal.
Backpack recently completed a Series A funding round, raising a notable $17 million, which has contributed to its valuation hitting $120 million. This acquisition has garnered attention, with interest reportedly coming from larger platforms prior to Backpack’s successful bid.
The events that led to the downfall of FTX were marked by shocking revelations surrounding the management of assets, particularly concerning the trading firm’s dependence on its own tokens. This crisis ultimately culminated in an emergency withdrawal freeze, widespread financial damage, and legal repercussions for key individuals involved in the operation.
As the new owner aims to navigate the regulatory landscape and fulfill responsibilities to former clients, challenges remain on the horizon, notably with the current suspension of operational activities being in place until at least mid-2025. During this interim, the focus will remain on client restitution and the groundwork for a potential revamp of services under the new brand.
The firm’s emergence from the shadow of its predecessor is a significant undertaking in an environment that has seen massive change and demand for regulatory clarity, especially within Europe. The commitment made towards regulatory compliance and client restitution is poised as a foundational principle for future operations as the sector continues to evolve.