Texas State Security Board asks FTX founder to testify at hearing

The Texas State Security Board asked FTX founder Sam Bankman-Fried to testify at a Feb. 2, 2023 hearing to discuss whether or not to order a cease-and- desist order, fines and refunds.

Bankman- Fried became a billionaire after he created FTX, gained popularity on social media and donated to causes addressing issues such as pandemics and climate change. He gave big donations to Democrats and liberal PACs, making him a major player in Washington.

His wealth was estimated to be $15.6 billion, but all changed on Nov. 11 when FTX filed for bankruptcy.

On November 22, the Texas State Securities Board scheduled a hearing with Bankman-Fried to discuss violations of the Securities Act.

According to the notice, Bankman- Fried is a founder of FTX US, FTX Capital Markets, LLC and West Realm Shires Services Inc.

FTX US was supposed to be regulated as a money services business and gave Texans the chance to deposit cryptocurrencies in accounts that generated a good return. It was also listed as a criptocurrency exchange where ether andBitcoin could be purchased and sold.

Voyager Digital Holdings offered Texans the chance to invest in accounts that paid high interest and were regulated as securities in Texas, but the company allegedly violated the Securities Function as well, and a hearing is pending.

Voyager filed for bankruptcy in July 2022, and FTX won an auction to purchase Voyager's assets of $51 million and an additional $60 million in earnouts and incentives in September 2022, according to the filing.

The purchase was objected to by the Texas Attorney General's Office because FTX was being investigated for violations of the Securities Act for the EARN accounts, which are things like investment contracts and evidence of indebtedness.

The filing said that FTX violated the Securities Act by offering and selling securities in Texas that were not registered or permitted for sale in Texas, and by offering and selling securities in Texas without registration as a dealer or agent.

Now the state is looking for several remedies, including issuing a cease-and- desist order to FTX, and requires Bankman-Fried to pay a refund of principal to Texans who invested in the EARN accounts, fining him up to $250,000 per illegal and fraudulent act, and ensuring refunds are paid to investors unless they receive a return of principal.

The hearing will be held on February 2, 2023, and will be conducted via Zoom.