SBF To Appear Before Texas Regulator In Securities Case

The Texas Securities Board has summoned embattled former FTX CEO Sam Bankman-Fried to a February 2nd hearing.

The summon is part of an investigation into whether FTX and Sam Bankman-Fried violated any Texas securities laws by offering unregistered securities products through its yield-bearing service. 

Texas State Security Board Investigating FTX 

Ex-FTX CEO Sam Bankman-Fried has been summoned by the Texas regulator on February 2nd. Bankman-Fried would have to answer claims that FTX offered unregistered securities. The Notice of Hearing was signed off by Texas State Securities Board’s (SSB’s) director of enforcement, Joe Rotunda, and served to Bankman-Fried on November 29th. According to the regulator, FTX US offered investors in Texas unregistered securities through the company’s EARN accounts. 

The latest notice alleges that Sam Bankman-Fried violated sections of the Securities Act in his role as the CEO of FTX.

“Respondent [Sam Bankman-Fried] violated Section 4003.001 of the Securities Act by offering and selling securities in Texas that were not registered or permitted for sale in Texas.”

It also added that FTX had not registered as a dealer or agent in Texas.

Investigation Pre-dates FTX Collapse 

The investigation into FTX pre-dates the dramatic bankruptcy and collapse of the exchange and was first announced on October 14th, 2022. Texas State Securities Board’s Director of Enforcement, Joe Rotunda, had, on November 18th, appealed to users to reach out to him if they were a client of FTX and based in Texas. In a Twitter post, Rotunda stated, 

“If you’re a client of @FTX_Official and you live in Texas, please reach out to me. We want to hear your story. My Texas State Securities Board email address is [email protected]”

The state regulator is seeking a cease-and-desist order for FTX to halt securities fraud in the state, return the money to affected investors, and impose relevant fines on Sam Bankman-Fried. 

Action Against FTX And Bankman-Fried 

The regulator stated that it was hopeful the hearing would lead to a Cease-and-Desist order which would prevent FTX from engaging in fraud related to offering or selling securities in Texas. Additionally, it also “prayed” that the judge order Sam Bankman-Fried to return the money that FTX customers based in Texas had invested in its unregistered EARN accounts. 

Additionally, the regulator wants the judge to consider an administrative fine to be issued to Bankman-Fried should he have profited in any way from the securities law violations. While this amount would not exceed $20,000 per violation, it could snowball, going up to $250,000 for every “illegal or fraudulent act” perpetrated on Texans over 65 years of age. Rotunda stated that the hearing would commence at 9 am local time on February 2nd, 2023, and Bankman-Fried could attend the hearing via Zoom.

Other Agencies Looking Into Bankman-Fried And FTX 

The Texas State Securities Board is not the only agency looking into FTX and its business dealings. Several congressional committees have been scheduled in the near future, with FTX and SBF on the agenda. FTX’s leadership has stated that it will cooperate with any and all investigations by the US Justice Department and the Securities and Exchange Commission. 

Meanwhile, Sam Bankman-Fried, in a recent interview, once again expressed remorse over his handling of FTX, its collapse, and the subsequent bankruptcy filings. Bankman-Fried stated, 

“You don’t get into the situation we got in if you, like, make all the right decisions.”

Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.