FTX founder SBF called to testify by Texas regulator

abdelaziz Fathi

The Texas State Securities Board (TSSB) has called on Sam Bankman-Fried to testify during an administrative hearing scheduled for Feb. 2, 2023. The move marks yet another expansion of enforcement agencies’ probes into FTX’s activities following its insolvency.

FTX

FTX founder was invited to discuss whether certain lending offerings violated the Securities Act, as well as repercussions of the exchange bankruptcy. The Texas regulator has been investigating FTX US since October as it allegedly offered unregistered securities products through its yield-bearing service.

Earlier this month, the board has significantly expanded its probe to examine the impact of this multibillion-dollar bankruptcy. The watchdog also started investigating celebrities who had endorsed FTX for potentially violating state securities laws. This included promotions by the Golden State Warriors’ Steph Curry and the Tampa Bay Buccaneers’ Tom Brady, who are now part of this broadened investigation.

FTX US, the now bankrupt cryptocurrency firm, was purportedly regulated as a Money Services Business with FinCEN. It also operated a money transmitter business with various states and touted these licenses when offering Texans the opportunity to deposit fiat or cryptocurrencies in accounts that generates yields.

“In connection with the offer of EARN accounts in Texas, Respondent intentionally failed to disclose material facts, including but not limited to the amount of money or cryptocurrency devoted to permissive uses, the identity, nature, and creditworthiness of borrowers, the type and nature of transactions involving digital assets, equities, options, and futures, the risks associated with individual digital assets, equities, options, and futures, the profits and/or losses derived from transactions, and financial information reflecting the assets and liabilities and cashflow,” the statement reads.

Texas’ watchdog is one of the most active state regulators in the crypto arena, joining federal authorities in going after businesses trying to avoid proper registrations.

The TSSB was initially focused in particular on the ICOs campaigns, which involve the sale of digital tokens related to blockchain projects. This was highlighted by the agency’s flagship case against BitConnect, a folded ICO project that has been accused of scamming millions out of investors.

Texas joined other state securities regulators in pursuing Voyager and other crypto firms for offering yield-bearing crypto accounts, which the regulators say are unregistered securities that don’t disclose their risks to investors.

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