The next few years are expected to take their toll on an estimated 30,000 Australian crypto investors that utilised the now failed cryptocurrency platform, FTX. The Australian arm of the platform has now been placed under voluntary administration with KordaMentha who are attempting to return funds to creditors, but warn that Australian-based customers may have to deal with a long wait and US administrators.
The investors are owed varying amounts of up to $1 million and are no longer able to access or withdraw their funds from the platform since the start of November. FTX Trading Limited, which is based out of Antigua and Barbuda, set up FTX Australia and FTX Express as Australian companies.
The accounts were frozen following revelations that the company had transferred an estimated $US10 billion in customer monies to another trading business. The Australian Securities and Investments Commission (ASIC) has already suspended the financial services license that was issued to FTX Australia.
Accountants are being advised to properly warn clients with holdings in FTX on whether they will be able to claim capital losses and when that might be possible. Co-founder of Australian software for crypto tax and compliance, Syla, Mayrna Kovalenko, has said that the affected investors will need to wait until the appointed administrator can confirm what occurred and the size of loss for each user.
She expressed concern over the shocking collapse of the crypto exchange that was actively working towards higher regulatory oversight. She pointed to allegations of unethical misappropriation of client funds whereby their assets were being given out to other entities to undertake risky investments and speculation as one of the likely biggest causes of the collapse.
Ms Kovalenko added that with the complications that arise from entities going into administration and insolvency, it could take many years to sort out the process. With Australian investors likely to suffer total or partial loss of their assets that were held by the crypto exchange, she recommended that tax agents and accountants duly advise their clients on whether and when they might be able to claim such losses.
For taxpayers to claim such losses, the Australian Tax Office (ATO) would require evidence that they had such investments, that the collapse occurred, and how they were affected. Evidence may include historical transaction records, emails, articles, and insolvency notices that substantiate such claims.
Meanwhile, the Treasury is seeking to introduce custodial and exchange legislation that will help prevent crippling losses to local investors in crypto markets. Treasury spokesman, Jim Chalmers, said that the FTX collapse highlighted the lack of transparency and consumer protection in the crypto market, with the government now intending to improve the regulatory framework without stifling innovation.
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