FTX Crypto Exchange, Its CEO Face Securities Violations Probe in Texas

FTX crypto exchange and its CEO Sam Bankman-Fried are facing a probe in the US. As per a state filing in Texas, FTX US is not registered as a money transmitter with the Texas Department of Banking, which has triggered the probe being overseen by the director of Texas’ Enforcement Division. In addition, the platform is being probed for potentially providing unregistered securities in the form of yield-bearing accounts to US-based customers. Bankman-Fried is also being investigated for his business practices as part of this probe.

FTX has been accused of violating the financial and business laws of the Texas state by allegedly offering yield-bearing savings accounts that are regulated under the securities category in Texas and FTX US has not registered to offer or sell securities in the state.

FTX allows users to see profits —or a portion of crypto staking rewards —on deposits. These can go up to 8 percent annual percentage yield (APY) on the first $10,000 (roughly Rs. 8.20 lakh) deposited and up to 5 percent APY on amounts above $10,000 but less than $10 million (roughly Rs. 82 crore).

The investigation is being overseen by Joseph Rotunda, the director of Texas’ Enforcement Division.

“I am aware that FTX Trading, along with FTX, 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, and the Enforcement Division is now investigating FTX Trading, FTX US, and their principals, including Sam Bankman-Fried,” a Coinpage report quoted Rotunda as saying.

In September, FTX US bought the assets of bankrupt crypto lender Voyager for approximately $1.422 billion (roughly Rs. 11,600 crore).

The asset purchase agreement between Voyager Digital LLC and FTX US will be presented for approval to the United States Bankruptcy Court for the Southern District of New York on Wednesday, October 19, 2022.

For now, FTX has promised to cooperate with the investigation. As per a Decrypt report, the crypto exchange has also claimed to have in communication with Texan regulators.

“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. We look forward to continue working with Texas,” said the statement by FTX.