Cryptocurrency exchange FTX US and its founder Sam Bankman-Fried (SBF) are under investigation by Texas securities regulators, a sign that law enforcement authorities have expanded their investigations into cryptocurrency industry activities.
The Texas State Securities Board (SSB) and the Texas Department of Banking filed an Oct. 14 supplement in the Voyager Digital case stating that the SSB is investigating FTX Trading, FTX US and their supervisors, Including co-founder and CEO SBF, accused them of offering unregistered securities in the United States.
FTX US won the auction (auction) for the remaining assets of Voyager Digital on September 26.
The supplemental statement from Texas regulators is in addition to an objection to the sale of Voyager Digital’s assets to FTX, also filed by the Texas Attorney General’s Office on the 14th.
In its objection, Texas argues that Voyager Digital and FTX do not comply with Texas law, and states that “an order proposing a sale or approving a sale seeks to limit the debtor’s liability for violations of the law and which state regulates the scope of fines and penalties to apply.” Specifically, Voyager Digital performed an unlicensed transfer of funds because the agency was not registered as a securities dealer in Texas, following objections from Texas regulators.
Joseph Rotunda, director of the enforcement division of the Texas Securities and Exchange Commission, said in a statement that he was able to download the FTX Trading app to his smartphone and use his name and Texas address to set up a revenue-generating account, but in fact FTX Trading does not operate in the United States.
Rotunda said: “The FTX Trading App now shows that I am starting to generate income on ether at an 8% annual interest rate. Based on the income I earn, and the ongoing investigation by the Texas Securities and Exchange Commission Enforcement Division, this income plan Obviously an investment contract.” He concluded:
FTX US should not be allowed to acquire the debtor’s assets unless the Securities and Exchange Commission has an opportunity to determine whether FTX US complies with the law.
Voyager Digital declared bankruptcy in July, and the case is now pending in the U.S. Bankruptcy Court for the Southern District of New York. The statement from the Texas regulatory authority mentioned above also mentions FTX co-founder and chief technology officer Gary Wang and FTX engineering director Nishad Singh.
In response to the above news, an FTX spokesperson said in a statement that the company is in talks with Texas securities regulators:
We have an active license application pending and believe we are operating within the limits of what is permitted during the transition period. We look forward to continuing our partnership with Texas. At the same time, we are working hard to ensure that Voyager customers get the best possible results.