Sam Bankman-Fried, founder and CEO of cryptocurrency exchange FTX and the US arm of FTX US, is under investigation by the Texas (US) securities regulator. The supervisory authority has a number of questions for the entrepreneur as well as the operations of his company.
The Texas State Securities Board is investigating FTX US over allegations that it offers unregistered securities products in the US through its yield maintenance services, according to a recent court filing.
TSSB enforcement director Joseph Rotunda made the allegation in a statement to the bankruptcy court overseeing the potential sale of Voyager Digital’s assets to cryptocurrency exchange FTX, the parent company of FTX US. He said FTX US may be in breach of state securities registration and sale laws as it currently offers a revenue-generating product to US customers.
The statement was added to the court record on Friday and was filed before the hearing on the completion of the potential sale of Voyager’s assets to FTX.
“As explained in more detail in this statement, I am aware that FTX Trading, together with West Realm Shires Services Inc. dba FTX US (“FTX US”), may be offering unregistered securities in the form of yield accounts to US residents. These products are similar to the yield deposit accounts offered by Voyager Digital LTD and others, and the Enforcement Division is now investigating FTX Trading, FTX US and their principals, including Sam Bankman-Fried,” Rotunda wrote.
He went on to explain that he downloaded the FTX app on his phone, created an account and transferred money via a bank transaction and Ethereum transaction to this new account. Moreover, the app informed him that he was eligible for a revenue account, despite the fact that the company’s terms and conditions state that FTX does not provide services to US residents.
FTX revenue accounts can bring in up to 8% APY on the first $10,000.
“Although I have identified myself by name and address, the FTX Trading App now shows that I am earning returns on ETH. The yield is estimated at 8% per annum,” he wrote.
“It looks like an investment contract, which in turn is regulated in Texas as a security,” he wrote. FTX US has not registered its yield programme with the state.
In a statement, an FTX spokesman said the company was already “in talks” with the TSSB.
“We have an active licence application pending and we believe we are operating fully within the scope of what we can do in the interim. We look forward to continuing to work with Texas. In parallel, we are working exceptionally hard to ensure that we provide Voyager’s clients with the best possible outcome – which we believe will happen if our asset recovery offer to users is approved by the Voyager bankruptcy court. We remain hopeful that all state regulators are working towards the same goal of returning assets to users,” said a company spokesperson.