AAX has become the latest cryptocurrency exchange to face troubles from FTX’s bankruptcy, highlighting the risks that remain in Hong Kong. Photo: Shutterstock
A Hong Kong cryptocurrency exchange has become the latest casualty of FTX’s collapse this month, leaving thousands of investors and clients in limbo and revealing the city’s exposure to a market it has recently sought to better regulate.
Atom Asset Exchange (AAX) has effectively shut down after it deleted its social media accounts and froze withdrawals this month, with the team now incommunicado. Angry investors have formed several group chats on Telegram titled “AAX users defending rights”, with each drawing more than 1,000 users demanding to know the AAX team’s whereabouts.
Adding to its troubles, a former executive, who this month attended Hong Kong FinTech Week, revealed on Twitter on Monday that he had resigned, saying he was “fighting for the community but none of the initiatives we came up with were accepted”.
“The way things are handled is without empathy and overly opaque,” wrote Ben Caselin, AAX’s former head of research and strategy. “I still believe things will be handled without evil intentions, but the damage is done. The brand is no more and trust is broken.”
AAX’s YouTube page and one of its Facebook pages have also disappeared this week. AAX has previously sponsored content for South China Morning Post’s Morning Studio.
While the specific losses of AAX’s fall are unknown, the exchange’s de facto closure offers another warning sign for Hong Kong’s ambition to become a virtual asset hub. On Tuesday, US-based cryptocurrency lender BlockFi filed for bankruptcy in New Jersey.
AAX was founded in 2018 and officially launched its exchange the following year, right after Hong Kong’s Securities and Futures Commission (SFC) announced its opt-in regulatory framework governing virtual asset trading platforms. Its former chief executive Thor Chan told the Post in 2019 that the exchange welcomed regulations, but he believed “part of the market will remain unregulated for a while”.
Former AAX CEO Thor Chan Chun-hung on November 1, 2019 Photo: SCMP / Jonathan Wong
As contagion from FTX’s bankruptcy spread throughout the crypto industry, AAX said on November 15 that it had halted withdrawals because of “acute pressure” on its capital position. It assured investors that “no funds have been compromised” and that it was working on raising more capital.
In its latest statement on November 21, AAX said that it would automatically liquidate all futures positions on its platform, including bonus futures positions.
Just two weeks before AAX froze withdrawals, Caselin participated in a November 1 FinTech Week panel with an FTX Ventures partner, where they discussed, among other topics, whether regulators “should develop a framework to regulate the cryptoasset market”.
Coinciding with FinTech Week, the SFC announced plans to change virtual asset regulations and allow for greater retail participation. It was widely seen as a move for Hong Kong to reclaim its status as Asia’s crypto hub after an exodus of large firms, including FTX.
Since FTX declared bankruptcy this month, some investors have suggested Hong Kong’s more cautious approach has proven to be shrewd. However, the full impact in the city is still unknown.
Hong Kong-based Hbit, a subsidiary of Huobi Global-affiliated New Huo Technology, also revealed this month that it is unable to withdraw US$18.1 million worth of cryptocurrencies deposited in FTX.
