Leading cryptocurrency exchange FTX and its subsidiary FTX US is being investigated by the Texas State Securities Board (SBB) for offering an unregistered yield program to customers in the United States.
FTX Maybe Operating in the U.S. Without a License
According to a court document filed at the United States Bankruptcy Court Southern District of New York on October 14, the exchange, alongside its American division, might be operating in the country without a license.
Joseph Jason Rotunda, the SBB director, described the yield program, which offers users rewards for depositing assets on the platform, as an unregistered securities product.
He also pointed out that the offerings are similar to the security services previously offered by the embattled asset manager, Three Arrows Capital (3AC). The company filed for bankruptcy earlier this year during the peak of the crypto winter.
Rotunda stated that FTX US claims to be a regulated Money Services Business registered under the U.S Treasury’s Financial Crime Enforcement Network (FinCEN).
The firm also prides itself as a money transmitter, a seller of payment instruments, and in other non-securities capacities in many states. Still, it is not registered as a money transmitter under the Texas Department of Banking nor registered as a securities dealer with the SBB.
FTX and FTX US Violate Texas Security Laws
The SBB boss also noted that he downloaded the FTX trading app on October 14 and created an account with his personal information, including his residential address in the U.S, which he later used to transfer $50.00 from his bank account.
Despite indicating that he was from the U.S, the FTX trading app showed he was eligible to participate in the yield program, giving him access to services designed for people outside the restricted regions.
As a result of the findings, Rotunda stated that the exchange and its U.S. subsidiary may have violated the Texas Securities Act, as neither of them is eligible to provide or sell securities offerings in Texas.
Additionally, the SBB boss said that FTX and FTX US might not be “fully disclosing all known material facts to clients before opening accounts and earning yield, thereby possibly engaging in fraud and making offers containing statements materially misleading or otherwise likely to deceive the public.”
He further noted that more investigation needs to be conducted to determine whether FTX and FTX US are operating without authorization and offering unregistered security products to U.S customers.
