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Sam Bankman-Fried Called to FTX Hearing by Texas Securities Regulator

Jesse Hamilton, Cheyenne Ligon - CoinDesk
2022-11-30 01:46
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Ex-FTX CEO Sam Bankman-Fried has been called to a Feb. 2 hearing to answer to claims from a Texas regulator that FTX US offered unregistered securities products through its yield-bearing service.
The Texas State Securities Board (TSSB) scheduled the administrative hearing, accusing Bankman-Fried’s company of securities violations in Texas, though the disgraced CEO is no longer running the company he founded, which is now mired in bankruptcy. The board, which sent a registered letter to Bankman-Fried’s address in the Bahamas informing him of the hearing, suggested the proceedings could be conducted over Zoom.
FTX Capital Markets, LLC, is registered as a dealer with the board, and “Texans were able to buy and sell publicly traded stock through the firm,” according to the hearing notice that was dated Nov. 22. The state regulator is seeking a cease-and-desist order for FTX to halt securities fraud in the state, to return money to affected investors and to target Bankman-Fried with fines.
The TSSB’s investigation into FTX US became public in October, when Director of Enforcement Joe Rotunda claimed in a filing in the Voyager Digital bankruptcy case that FTX US may have been violating state law governing the registration and sale of securities products because it was offering a yield-bearing product to U.S. customers.
Speaking at a panel discussion with FTX general counsel Ryne Miller in New York in October, Rotunda said he considered filing an enforcement action as a last resort. He added that the TSSB preferred to work through issues with companies before an enforcement action became necessary, and FTX had, up until that point, been cooperative.
Rotunda did not return CoinDesk’s request for comment by the time of publication.
The state matter may have to stand in line behind a long list of federal and international investigations over what went on inside FTX.
The collapse of the Bahamas-based exchange is currently being investigated by the U.S. Securities and Exchange Commission (SEC), the Department of Justice (DOJ), the Bahamian police, and Senators Elizabeth Warren (D-Mass.) and Dick Durbin (D-Ill.).
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