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FTX In Hot Water
Texas regulators are intensifying their gaze on Sam Bankman-Fried’s FTX exchange.
Regulators are investigating whether yield-bearing accounts offered by FTX US should be deemed unregistered securities. Texas State Securities Board (TSSB) Director of Enforcement Division Joseph Rotunda made the declaration in a court document filed last week relating to the bankruptcy proceedings of Voyager Digital. FTX recently won the bid to buy out the firm’s assets for $1.4 billion. Rotunda said FTX Trading, FTX US and Sam Bankman-Fried might be violating Texas securities laws by offering unlicensed securities to U.S. customers in the form of yield-bearing products.
In the court filing, Rotunda reveals he created an account via the FTX app and deposited Ethereum and money through a bank transaction. Furthermore, the app said he was eligible for a yield-bearing account, despite the firm’s terms and conditions claiming FTX does not offer such services to U.S.-based residents.
Rotunda notes that FTX US has not obtained the requisite approval to sell securities in Texas. He believes the yield product is an investment product which should be registered as a security in the state.
 
 
The TSSB Director also asserted that FTX did not disclose enough information to customers before they opened their accounts, thus potentially committing fraud.
U.S. Regulators Are Coming For Crypto
The new probe into FTX comes as regulatory agencies and policymakers in the United States intensify their scrutiny of cryptocurrencies. As Rotunda indicated, the bankrupt Voyager Digital is also being investigated by Texas financial regulators over potential securities violations. As such, FTX should not be allowed to buy the assets of the beleaguered lending platform until it’s established whether the exchange was also indeed violating Texas state financial law governing the sale of securities.
The Securities and Exchange Commission (SEC), in particular, has been interested in the legal status of crypto assets. SEC boss Gary Gensler believes that most cryptocurrencies, including Ethereum post-Merge, qualify as securities. The SEC is mired in a court battle with Ripple, as the regulator claims XRP is a security rather than a commodity.
Although the lawsuit has not reached a conclusion yet, the present consensus is that the court will rule in favour of Ripple, and XRP will not be considered a security. If this scenario does actually play out, it will set a strong precedent that similar crypto assets should also be regarded as commodities instead of securities.
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