Officials want FTX to be stopped from buying Voyager Digital's assets unless and until it can be proven that they are complying with securities laws.
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FTX and Sam Bankman-Fried are under investigation in Texas, a new court filing reveals.
Joseph Jason Rotunda, director of enforcement of the state's security board, has alleged that the company "may be offering unregistered securities in the form of yield-bearing accounts to residents of the United States."
In the document, he draws on his own personal experience — and draws parallels to a current case against Voyager Digital, whose assets were recently acquired by FTX.
Rotunda notes that American consumers who attempt to go to FTX.com are presented with a pop-up window that attempts to redirect them to FTX.US, a separate exchange with specific licenses that cater to users in that country.
He alleges that the pop-up goes on to warn that American traders won't be able to access any of FTX.com's services.
But Rotunda claims that, last week, he was able to download the FTX trading app on his smartphone and create an account — linking it to his bank. And despite the fact he provided his full name and residential address, he was able to buy a small amount of Ether.
Here's where the problems arise: Rotunda then says he was informed that he would be able to earn yield on this ETH — at a rate of up to 8% APY.
That's despite the fact that FTX claims "it doesn't onboard or provide services" to people who are residents of the United States.
Warning that this may amount to a violation of the Texas Securities Act, Rotunda alleged:
"Despite the fact I identified myself by name and address, the FTX Trading App now shows that I am earning yield on the ETH. The yield is valued at 8% 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, evidence of indebtedness and note, and as such appears to be regulated as a security in Texas as provided by Section 4001.068 of the Texas Securities Act. At all times material to the opening of this FTX account, FTX Trading and FTX US have not been registered to offer or sell securities in Texas."
The official went on to claim that FTX Trading, as well as FTX US, "may not be fully disclosing all known material facts to clients prior to opening accounts and earning yield, thereby possibly engaging in fraud and/or making offers containing statements that are materially misleading or otherwise likely to deceive the public."
Ultimately, Rotunda argues that any FTX purchase of Voyager Digital's assets should be stopped "unless or until the Securities Commissioner has an opportunity to determine whether FTX US is complying with the law."
