The Texas State Securities Board (SSB) and the Texas Department of Banking (DOB) filed a supplemental declaration Oct. 14 in the Voyager Digital case in which it stated that the SSB is investigating FTX Trading, FTX US and their principals, including co-founder and CEO Sam Bankman-Fried, for allegedly offering unregistered securities in the United States. FTX US won the auction for the remaining Voyager Digital assets on Sept. 26.
The supplemental declaration from the Texas regulators is attached to an objection to the sale of Voyager Digital assets to FTX filed by the Texas Attorney General’s office also on Oct. 14. In that objection, the state claim that Voyager Digital and FTX are not in compliance with Texas law and “the proposed sale, or order approving the sale, attempts to limit the Debtors’ liability for unlawful […] conduct for which state-regulatory fines and penalties may apply.” Specifically, according to the objection, Voyager Digital conducted unlicensed money transmissions, as it was not registered as a securities dealer in Texas.
Director of the SSB enforcement division Joseph Rotunda stated in the declaration that he was able to download the FTX trading app to his smartphone and create a yield-bearing account using his own name and Austin, TX address. That app is linked to FTX Trading, which does not conduct business in the United States. Nonetheless, Rotunda stated:
“The FTX Trading App now shows that I am earning yield on the ETH. The yield is valued at 8 percent APR. Based upon my earning of yield and an ongoing investigation by the Enforcement Division of the Texas State Securities Board, the yield program appears to be an investment contract.”
Rotunda concluded, “FTX US should not be permitted to purchase the assets of the debtor unless or until the Securities Commissioner has an opportunity to determine whether FTX US is complying with the law.”
Voyager Digital declared bankruptcy in July. Its case is now being heard in the United States Bankruptcy Court of the Southern District of New York. FTX co-found and chief technology officer Gary Wang and FTX director of engineering Nishad Singh are also mentioned in the declaration.
FTX is excited to be regulated in Dubai by VARA! We’re excited to expand out our presence in the city, and to work with regulators who have taken the lead in establishing a regulatory framework for digital assets, protecting customers and allowing for innovation.
— SBF (@SBF_FTX) October 17, 2022
In happier news for the crypto exchange, Bankman-Fried announced on Twitter Oct. 17 that the company has been registered by Dubai’s Virtual Asset Regulatory Authority. Its FZE subsidiary had received a Minimal Viable Product license in July.