Daily Crypto News

Texas regulator probes crypto platform FTX and CEO Sam Bankman-Fried


Texas’s securities regulator is investigating crypto trading platform FTX and its billionaire founder, Sam Bankman-Fried, for selling an investment product that potentially violated state law.

The probe, announced in a Friday filing by Texas State Securities Board enforcement director Joe Rotunda, centers on whether FTX has been illegally offering Texans accounts that pay interest on crypto deposits.

Rotunda argues that the accounts are akin to securities and that the company should have registered with the state before signing up its residents. It’s the latest attempt by state financial watchdogs to crack down on leading crypto players as federal policymakers remain divided about how to write rules for the industry.

The investigation is a possible roadblock to Bankman-Fried’s bid to buy up digital assets from companies that buckled under the weight of the crypto market’s downturn earlier this year.

How state regulators supplanted the feds in policing crypto markets

The 30-year-old chief executive last month won an auction for the assets of bankrupt crypto lender Voyager Digital with a $1.4 billion bid. But Rotunda in his filing asked the New York bankruptcy court handling Voyager’s case to block that sale. He said FTX’s yield-bearing accounts resemble a similar offering from Voyager that drew cease-and-desist orders from Texas and other states before the company collapsed.

FTX said in a statement that the company has been in talks with the Texas regulator “for a while.”

“We have an active application for a license which has been pending, and believe we are operating fully within the bounds of what we can do in the interim,” FTX spokesman Patrick Jordan said. “We look forward to continue working with Texas.” The company said it is “working exceptionally hard to ensure Voyager customers get to the best possible outcome — which we believe will happen if our bid to give assets back to users is approved by the Voyager bankruptcy court.”

Rotunda in his filing said he tested FTX’s product on his own smartphone. He downloaded the company’s trading app, linked it to a personal bank account and deposited a small amount of ethereum, which subsequently started earning yield.

State regulators have targeted crypto platforms offering such programs on the grounds that, by generating returns from pooled deposits, the investments qualify as securities and must be registered. Texas and a handful of other states have been at the vanguard of that push. In addition to Voyager, they filed cease-and-desist orders against Celsius Network and, along with the Securities and Exchange Commission, reached a $100 million settlement with BlockFi.

Read More: Texas regulator probes crypto platform FTX and CEO Sam Bankman-Fried

Disclaimer:The information provided on this website does not constitute investment advice, financial advice, trading advice, or any other sort of advice and you should not treat any of the website’s content as such. NewsOfBitcoin.com does not recommend that any cryptocurrency should be bought, sold, or held by you. Do conduct your own due diligence and consult your financial advisor before making any investment decisions.