Texas Regulators Investigate Sam Bankman-Fried and FTX

  • Texas regulators believe Sam Bankman-Fried and FTX violated state laws in their offerings and lending.
  • FTX recently won the bid to purchase Voyager’s assets.
  • FTX allows users to earn a yield on deposits of up to 8% APY on the first $10,000 deposited and up to 5% APY on sums over $10,000 but under $10 million.

Crypto billionaire, Sam Bankman-Fried, founder of crypto exchange, FTX, is reportedly being investigated by Texas regulators for a possible violation of securities laws. According to a state filing, authorities are investigating whether certain offerings and lending on the crypto platform violate state laws.

Authorities in Texas are working to determine if the yield-bearing accounts that FTX US offers should be regarded as unregistered securities, as stated in a document relating to Voyager Digital’s bankruptcy proceedings. FTX recently succeeded in its quest to purchase the company’s assets.

The Southern District of New York’s U.S. Bankruptcy Court reportedly received a motion from the Texas States Securities Board and the Texas Department of Banking. According to the filing with the U.S. bankruptcy court:

FTX US claims to be regulated as a Money Services Business with FinCEN (No. 31000195443783) and as a money transmitter, a seller of payment instruments and in other nonsecurities capacities in many different states. It is not, however, registered as a money transmitter or in any other capacity with the Texas Department of Banking and it is not registered as a securities dealer with the Texas State Securities Board.

Joseph Jason Rotunda, director of enforcement for the Texas State Securities Board, claimed he was able to open up an account through the FTX app and earn a yield on Ethereum deposits as well as money transferred from his connected bank account. Rotunda, in an interview, argued that FTX US has not been licensed to offer or sell securities in Texas.

The director of enforcement wrote in the filings,

Based upon my earning of yield and an ongoing investigation by the Enforcement Division of the Texas State Securities Board, the yield program appears to be an investment contract, evidence of indebtedness and note, and as such appears to be regulated as a security in Texas.

According to reports, Texas officials are also looking into Voyager’s yield-bearing accounts, which could be considered unregistered securities. Regulators are also becoming more concerned about Voyager’s, and competitors Celsius’s and BlockFi’s, respective yield offerings.

Voyager was one of the three top crypto-lending platforms that halted operations and later filed for bankruptcy. The company was severely affected by the fall of the cryptocurrency market. 

FTX and Sam Bankman-Fried made attempts to buy Voyager assets in the months following its filing. The crypto trader reportedly won the bid to purchase Voyager’s assets, which were worth about $1.4 billion. 

Other regulators are expected to begin their own investigations against FTX in the coming months.

Lawrence Woriji Verified

Lawrence has covered some exciting stories in his career as a journalist, he finds blockchain-related stories very intriguing. He believes Web3 will change the world and wants everyone to be a part of it.

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