Cryptocurrency exchange FTX, its division FTX US, and founder and CEO Sam Bankman-Fried are under investigation by Texas regulators for possible securities violations.
Regulators are investigating whether high-yield accounts offered by FTX US should be considered unregistered securities. This is detailed in documents related to Voyager Digital’s bankruptcy proceedings. FTX recently won a bid to acquire the company’s assets. Barrons was the first to report the news.
The Director of the State Securities Commission Said He Opened a High-Yield Account With FTX US
According to recent court filings, the Texas Securities Commission is investigating FTX US for allegations that it offers unregistered securities products in the United States through its high-yield services.
The Director of the State Securities Commission said he opened a high-yield account with FTX US even though he identified his address as being in the United States.
TSSB Enforcement Director Joseph Rotunda made the allegations in filings with the bankruptcy court overseeing the potential sale of Voyager Digital’s assets to FTX US’s parent company, cryptocurrency exchange FTX. He said FTX US currently offers high-yield products to U.S. customers, which could violate state laws governing the registration and sale of securities products.
The application was added to court records on Friday. It was filed before a hearing to complete the potential sale of Voyager’s assets to FTX. Barrons was the first to report the filing.
“As explained in detail in this statement, FTX Trading, in partnership with West Realm Shires Services Inc. dba FTX US (“FTX US”), will provide residents of these products with high-income accounts. We are aware that we may offer unregistered securities. It appears to be a high-yield savings account owned by Voyager Digital LTD and others. Enforcement is investigating FTX Trading, FTX US, and its clients, including Sam Bankman-Fried,” Rotunda wrote.
He further explained that he downloaded the FTX app on his phone, created an account, and transferred funds to this new account through banking and Ethereum transactions. He said the app was entitled to a high-yield account, despite the company’s terms of service that FTX does not serve U.S. citizens.
FTX Income Accounts can earn up to 8% APY on the first $10,000 submitted.
“Despite verifying my identity by name and address, the FTX trading app shows me earnings on ETH. Yield is set at 8% of APR.”
Response to the Allegations
FTX spokesperson wrote that it would be regulated as a security in Texas because it “looks like an investment treaty.” FTX US does not have a registered yield program in the state. In a statement, an FTX spokesperson said the company was already “in negotiations” with TSSB.
“We[FTX] have an active, pending license application and believe we are fully operational within what we can do in the meantime. FTX looks forward to continuing to work with the State of Texas. We work very hard to ensure the best possible outcome for our Voyager customers, which will only happen if they approve our proposal to return their assets to them in the Voyager Bankruptcy Court. We think so,” said the spokesperson.