Former CEO of FTX, Sam Bankman-Fried, has been summoned to a hearing on February 2 to face the allegations from a Texas regulator that the company sold unregistered securities products through its yield-bearing service.
Although Bankman-Fried is no longer CEO of the company he created and it is currently in bankruptcy, the Texas State Securities Board (TSSB) has scheduled an administrative hearing to accuse the company of securities crimes in Texas.
The board advised conducting the hearing over Zoom and informed Bankman-Fried of the hearing by registered letter sent to his address in the Bahamas.
The board has approved FTX Capital Markets LLC as a dealer, and “Texans were able to buy and sell publicly traded stock through the firm,” as stated in a hearing notification dated November 22. The state regulator wants a cease-and-desist order against FTX to stop securities fraud in the state, restore money to impacted investors, and penalize Bankman-Fried.
In a filing in the bankruptcy case of Voyager Digital, TSSB Director of Enforcement Joe Rotunda suggested that FTX US may have been in violation of state law governing the licensing and marketing of securities products when it provided a yield-bearing product to U.S. customers, prompting the TSSB to launch an investigation into the company.
Enforcement Action Against FTX
During an October panel discussion in New York City with FTX General Counsel Ryne Miller, Rotunda mentioned the possibility of an enforcement action as a last option.
However, there are likely to be numerous federal and international inquiries into what happened at FTX, which could delay the state matter.
Meanwhile, U.S. authorities, including the SEC, DOJ, Bahamian police, and Senators Elizabeth Warren and Dick Durbin, are looking into what caused the collapse of the exchange in the Bahamas.
Noteworthy, FTX Bahamas, a subsidiary of FTX Digital Markets Ltd, has sought bankruptcy protection under Chapter 15 in the United States. Indeed, a foreign debtor can file for bankruptcy in the United States court system under Chapter 15.