Texas securities regulators have launched investigations into FTX CEO Sam Bankman-Fried (SBF) and FTX US, a subsidiary of the exchange for allegedly trading unregistered securities.
According to the court filing made by Joseph Rotunda, Director of Enforcement for the Texas State Securities Board and the Texas Department of Banking, the regulators allege that it offers unregistered securities in the form of yield-bearing accounts to U.S residents. It argues that since returns are generated from these pooled deposits, they qualify as securities and must therefore be registered.
Interestingly, in the document filed with the U.S Bankruptcy Court in the Southern District of New York, the case against Sam and his subsidiaries are about Voyager Digital. The U.S Bankruptcy Court is also overseeing the sales of assets of bankrupt crypto lender Voyager Digital.
Before now, regulators have been investigating Voyager and other crypto firms for offering crypto yield farming products. The regulators argue that investors are unaware of the associated risks with this type of product which has oftentimes turned out to be fraudulent.
Effect of the investigation on FTX’s planned acquisitions
Since the investigation is still ongoing and no formal charges have been made yet, it’s unclear if SBF or any of his firms have violated any known state laws.
However, depending on how events play out, the investigation could serve as a hindrance to the 30-year-old Chief executive’s plan to acquire bankrupt crypto lender Voyager after he won the auction bid for its assets valued at $1.4 billion. As revealed by the filing, Rotunda requested the bankruptcy court presiding over Voyager’s case to block the sale.
The results of the investigation might also prompt further investigations by other US regulators including the Securities and Exchange Commission (SEC).
Meanwhile, a spokesperson from FTX says the firm maintains constant communication with the regulator. In addition, he says the firm has an active application for a license and it’s currently operating within its boundaries pending the approval of its license.