Sam Bankman-Fried and FTX US under investigation by Texas securities regulator
|- FTX US and CEO Samuel Bankman-Fried hit by Texas State Securities Board investigation.
- The board is looking into crypto yield farming accounts offered by FTX US.
- FTT, the native token for FTX exchange, continued its decline, down 57.8% over the past year.
The Texas State Securities Board believes the crypto yield program of FTX is an investment contract and should be regulated as a security. FTT price nosedived in response to news of investigation against the FTX CEO and the exchange.
Also read: DeFi token holders alert: Ribbon Finance’s lend product poses risks, argues analyst
Is FTX US offering unregistered securities, Texas regulator weighs in
Texas State Securities Board alleges that FTX US exchange’s yield program is the offering of unregistered securities in the form of yield-bearing accounts to the residents of the US. Joseph Jason Rotunda, Director of Enforcement at the Texas State Securities Board believes FTX’s yield program needs to be regulated as a security.
The Howey test is used to determine what qualifies as an "investment contract" and would therefore be subject to U.S. securities laws. Applying the Howey test, investments are labeled as securities if there is an expectation of profits from the management.
State securities regulators have been pursuing companies that offer crypto yield farming products, like the ones offered by the FTX exchange and Voyager. In the sale of unregistered securities, sellers typically don’t disclose associated risks to investors. In such cases, products turn out to be fraudulent and this is a leading cause of concern.
Rotunda believes Securities regulators should not have allowed FTX to purchase Voyager’s assets until they could have determined their compliance with the law. It remains unclear whether FTX-US or Bankman-Fried have violated any securities laws and the investigation is ongoing, No formal charges have been filed against the giant yet.
FTX exchange’s native token FTT witnessed a decline in its price. FTT price has plummeted 4% in the past 30 days. At press time, FTT token is trading at $23.66 and it yielded 4.5% losses over the past fourteen days. There was panic selling in response to the news of investigation in FTX exchange and Samuel Bankman-Fried.
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