It has been a month since Fisco officially took over the management of Japanese crypto exchange Zaif, but they may be finding that their investment was all for naught. On June 21, it was announced that the Financial Services Agency (FSA) had taken over the troubled exchange service in April for what was referred to as “legal violations.”
When Fisco took over the exchange, they were given very firm guidelines that they were expected to make dramatic changes at Zaif. Not only were there several violations, but they were cited for the potential risks that the company could offer as an exchange for both terrorists and those looking to launder money. This appears to be just the tip of the iceberg.
Back in September, the company had lost over $62 million in SegWitCoin (BTC), monacoin (MONA), and Bitcoin Cash (BCHABC) when their systems were hacked. This came just one month before Fisco took over operations. The finalization of that acquisition occurred in April, just days before the FSA to control of the ailing exchange.
According to a report, Japan’s financial watchdog organization found that the efforts taken by Fisco to fix the business systems, especially related to money laundering, were grossly insufficient. As a result, the FSA used the Act on Settlement of Funds as lawful authority to take control of the company.
According to a statement issued by the agency, they found that Fisco failed to see the “importance” in meeting the legal compliance standards. Even the customer verification system proved to be lacking. “In the section where users can enter identity verification information, they can select “other” if it is not possible to check their occupation or purpose of the transaction. When “other” is selected, the account can be opened without entering anything,” the FSA explained in their ruling.
The act was officially approved by the Japanese House of Representatives in May. It gave the FSA greater authority to regulate cryptocurrencies to ensure that the exchanges did not become a hotbed for criminal activity.
Fisco does not look to be the only company currently under investigation. In April, it was reported that Huobi Japan was also being reviewed, but no word has been provided on what action the FSA has taken against them if any.
No additional information was provided as to what Fisco would have to do to regain control of Zaif. In fact, no statement was issued if they would ever be able to take any action that would enable them to regain control of the business.
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