Texas State Securities Board Investigating FTX US, Sam Bankman-Fried

FTX Trading, FTX US and SBF are all targets of a state regulator investigation
Regulators note confusion between FTX Trading and FTX US offerings in the filing

The Texas State Securities Board is investigating FTX affiliate FTX US over alleged unregistered securities offerings, the regulator revealed Monday.

The state regulator claimed in the filing that FTX US’s yield-bearing account offerings are classified as unregistered securities. Texas authorities compared FTX US’ offering, which gives users up to 8% annual percentage yield on their first $10,000 investment, to now-bankrupt crypto lender Voyager Digital’s product.

“FTX US…may be offering unregistered securities in the form of yield-bearing accounts to residents of the United States,” a state filing stated. “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 Bankman-Fried.”

In the filing, a state regulator claims that yield-earning accounts were offered to a US resident. The regulator claims that US residents are directed to use the FTX Trading app, even though these services are not available in the US.

Former FTX US President Brett Harrison confirmed in July 2021 that the exchange’s yield offerings were available to any user that has access to FTX or FTX US.

How this works:
-earn 8% APY on first $10k, 5% APY on everything above that
-you can earn on any fiat or crypto
-yield is rewarded hourly and you can withdraw at any time
-available in every FTX US and FTX jurisdiction
-available on @blockfolio app for now, more to come later https://t.co/IGlEmyt7Od
— Brett Harrison (@BrettHarrison88) July 20, 2021

“We have been in talks with the Texas state regulator for a while,” a spokesperson from FTX said. “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.”

Given that FTX Trading is headquartered in the Bahamas and incorporated in Antigua and Barbuda and is not available in the US, it is unclear how much authority the state regulator may have.

State regulators also pointed to the exchange’s current registrations in the filing, noting that FTX.US is not currently registered as a money transmitter with the Texas Department of Banking nor is it registered as a securities dealer with the Texas State Securities Board.

“FTX Trading and FTX US may not be fully disclosing all known material facts to clients prior to opening accounts and earning yield, thereby possibly engaging in fraud and/or making offers containing statements that are materially misleading or otherwise likely to deceive the public,” the filing added.

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Casey Wagner
Blockworks
Senior Reporter
Casey Wagner is a New York-based business journalist covering regulation, legislation, digital asset investment firms, market structure, central banks and governments, and CBDCs. Prior to joining Blockworks, she reported on markets at Bloomberg News. She graduated from the University of Virginia with a degree in Media Studies.
Contact Casey via email at [email protected]

Source: https://blockworks.co/texas-state-securities-board-investigating-ftx-us-sam-bankman-fried/