Sam Bankman-Fried and FTX.US Probed By Texas Securities Board: Barrons

Summary:

  • Texas securities regulators said crypto billionaire and FTX CEO Sam Bankman-Fried is under investigation.
  • The American affiliate of the digital asset exchange known as FTX.US and other company executives are subjects of the probe by Texas authorities.
  • Yield-bearing accounts are the crux of the matter, as explained by enforcement director Joe Rotunda during the ongoing Voyager Digital bankruptcy hearing.
  • Rotunda further opined that authorities should halt the $1.4 billion acquisition of Voyager’s assets by FTX until a time regulators can verify compliance.
  • Crypto trading firm BlockFi agreed to pay a $100 settlement after facing similar allegations from the U.S. Securities and Exchange Commission.

FTX CEO Sam Bankman-Fried and other FTX executives are under investigation by the Texas State Securities Board over yield offerings provided by FTX.US, the American affiliate of SBF’s cryptocurrency exchange. 

Barrons reported that Texas  State Securities Board enforcement director Joe Rotunda disclosed the development during the Voyager Digital bankruptcy proceedings which are ongoing at press time. Voyager filed for chapter 11 bankruptcy in July after exposure to Terra’s failed ecosystem and unsettled debts with entities like Three Arrows Capital crippled the company’s finances. 

The crypto broker auctioned off some of its assets as part of the proceedings. Notably, SBF’s FTX company scooped up some assets in a massive $1,4 billion deal. 

According to the filing made by Rotunda’s agency. FTX.US accounts that offer yield incentives may be in violation of securities laws. The accounts in question offer passive income or yield to investors on their crypto deposits. 

FTX US (“FTX US”), may be offering unregistered securities in the form of yield-bearing accounts to residents of the United States. 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 BankmanFried.

As part of the probe into FTX.US and Sam Bankman-Fried, Rotunda proposed that authorities halt the Voyager asset acquisition deal. The enforcement director said the deal should not go through until regulators can confirm and verify the company’s compliance with securities policies.

Sam Bankman-Fried’s FTX, BlockFi, And Other Embroiled In Securities Debacle

Sam Bankman-Fried’s FTX and subsidiary FTX.US face similar scrutiny suffered by crypto broker BlockFi earlier in the year. BlockFi ultimately paid $100 million in what remains the largest penalty paid by a crypto company at press time. 

As highlighted in Voyager bankruptcy proceedings, the digital trading firm also offered yield-bearing accounts identical to offerings made by the penalized BlockFi and the investigated FTX. 

Indeed, compliance probes into cryptocurrency companies by U.S. agencies like the Securities and Exchange Commission have intensified in recent months. SEC Chair Gary Gensler’s rhetoric suggests that only a handful of digital asset companies and protocols do not run foul of financial regulations. 

The SEC also has cases against Ripple and Coinbase per reports.