Failed cryptocurrency exchange FTX set up two companies in Malta this past April, adding to its complex constellation of firms across the globe. 

FTX Malta Gaming Services Limited and FTX Malta Holdings Limited were registered as local companies in April 2022. Both list Sam Bankman-Fried, the billionaire founder of FTX Trading, as their sole director.   

Neither of those two firms was licensed to carry out any activities related to virtual financial assets, or cryptocurrencies, in or from Malta, a spokesperson for the Malta Financial Services Authority said.

The MFSA said it was nevertheless “monitoring the situation internationally” to keep an eye on the potential impact FTX’s bankruptcy could have on local licence holders.

The Bermuda-based FTX filed for Chapter 11 bankruptcy proceedings in the US last week, capping a dramatic fall from grace for a company that was at one point valued at US$32 billion. Until two weeks ago, it was the world’s second-largest cryptocurrency exchange.

The walls came crashing down following reports questioning the financials of FTX and another firm owned by Bankman-Fried, Alameda Research. As questions multiplied, clients rushed to withdraw their funds and FTX was forced to acknowledge that it was insolvent.  

FTX allowed users to buy, sell and trade cryptocurrencies. Users are currently unable to withdraw their funds, with Reuters and the Financial Times reporting that the company has billions of dollars less on its books than it owes customers.

Reuters reported that it may have one million creditors.

Bankman-Fried built his business empire using a complex network of companies spanning the globe, from Japan to the Bahamas, the US, Switzerland and Singapore, among others. ]

In Europe, the company operated using a licence issued by Cyprus’ financial regulator. That licence was suspended earlier this week.

Filings with the Malta Business Registry show that FTX had also established a Maltese base, though its two Maltese companies appear to have been largely dormant since they were set up seven months ago: neither filed any documents apart from their Articles of Association and directors’ declarations.

FTX’s bankruptcy has translated into financial chaos for the crypto markers, with major cryptocurrencies, including bitcoin, plunging dramatically in price.

On Monday, Binance pledged to establish a liquidity fund to help struggling crypto firms, in an attempt to curb sector fallout from the collapse of its rival.

Cryptocurrency is a digital payment system that does not rely on banks to verify transactions. Instead, it uses a peer-to-peer system to verify authenticity.

Malta bet significantly on the sector in 2017, when then Prime Minister Joseph Muscat said that he wanted the island to be at the forefront of the technology.

In 2018, at the height of the so-called ‘blockchain island’ hype, several big names in the cryptocurrency exchange world announced they would be setting up shop in Malta. That never materialised.

Among them was Binance, which the government had said would be relocating its core business to Malta.

The company subsequently distanced itself from claims that it would be relocating its core business to Malta and never registered as a VFA service provider.

According to the MFSA services register, there are currently just 15 VFA service providers registered under Maltese law.

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