Crypto Exchange FTX US Under Investigation by Texas Regulator Over Securities Allegations

| Updated
by John K. Kumi · 2 min read
Crypto Exchange FTX US Under Investigation by Texas Regulator Over Securities Allegations
Photo: Unsplash

The filing explained that a yield program introduced by FTX appears to be regulated as a security in Texas.

Sam Bankman-Fried‘s FTX US is reportedly under investigation by the Texas State Securities Board for selling unregistered securities. This was after TSSB Director of Enforcement Joseph Rotunda accused the exchange in a filing to the bankruptcy court in charge of the potential sale of Voyager Digital’s assets to the FTX crypto exchange.

“FTX US should not be permitted to purchase the assets of the debtor unless or until the Securities Commissioner has an opportunity to determine whether FTX US is complying with the law and related and/or affiliated companies, including companies commonly controlled by the same management, are complying with the law,” according to the filing.

According to Rotunda, the company has announced that it does not onboard US residents. However, he was able to download the app, sign up for an account with his name and address, and even made a deposit through a bank transaction and an Ethereum transaction. In addition, the app prompted him that he was eligible for a yield-bearing account. It is important to note that FTX yield accounts are subjected to 8% APY on the first $10,000 deposited. 

The investigation filing explained that a yield program introduced by FTX appears to be regulated as a security in Texas since it is considered as an investment contract, evidence of indebtedness, and note. This is quite similar to the lawsuit against Ripple Labs for selling unregistered securities. XRP, has since the lawsuit struggled to surge.

“As more fully explained throughout this declaration, I am aware that FTX Trading, along with West Realm Shires Services Inc. dba FTX US (‘FTX US’), may be offering unregistered securities in the form of yield-bearing accounts to residents of the United States,” wrote Rotunda.

“These products appear similar to the yield-bearing depository accounts offered by Voyager Digital LTD et al., and the Enforcement Division is now investigating FTX Trading, FTX US, and their principals, including Sam Bankman-Fried,” he added. 

A spokesperson of the company responded that there is an active application pending. Until the approval, he believes that the exchange is operating fully within the bounds of what it can do. In addition, the spokesperson mentioned that the company is working to ensure that Voyager customers get the best outcome. This could be possible if their decision to give assets back to users is approved by the Voyager bankruptcy court. 

Cryptocurrency news, News
John K. Kumi
Author John K. Kumi

Excellent John K. Kumi is a cryptocurrency and fintech enthusiast, operations manager of a fintech platform, writer, researcher, and a huge fan of creative writing. With an Economics background, he finds much interest in the invisible factors that causes price change in anything measured with valuation. He has been in the crypto/blockchain space in the last five (5) years. He mostly watches football highlights and movies in his free time.

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