Crypto’s ‘White Knight’ Targets Texas Securities Probe
He has been called the “white knight” of the crypto space.
Sam Bankman-Fried, founder and CEO of cryptocurrency exchange FTX, has gone out of his way to save companies that have withered in the face of the “crypto winter.”
The 30-year-old billionaire, often referred to as SBF, told NPR in an interview that “I feel we have a responsibility to seriously consider stepping in, even if it’s at a loss to ourselves, to stop contagion. “
FTX seemed to rise above the crypto bloodshed, with revenues rising 1000% in 2021.
Over the summer, FTX struck a deal with BlockFi that gives the exchange the option to buy the troubled crypto lender for up to $240 million. The agreement also includes a $400 million revolving credit facility.
More recently, Bankman-Fried struck a deal with Anthony Scaramucci, who was briefly White House communications director under former President Donald Trump.
FTX Ventures will acquire 30% of Skybridge Capital, the alternative investment firm founded by Scaramucci, aka “The Mooch.”
“Active application for license”
“FTX Ventures’ investment will provide SkyBridge with additional working capital to fund growth initiatives and new product launches,” the companies said in a press release. “Additionally, SkyBridge will use a portion of the proceeds to purchase $40 million in cryptocurrencies to hold the company’s balance sheet as a long-term investment.”
FTX bid $1.4 billion for bankrupt lender Voyager, which was hit hard when Three Arrows Capital defaulted on a $670 million loan.
Now, however, it appears that the white knight’s armor may be a bit tarnished.
FTX US and Bankman-Fried are the subject of an investigation by the Texas State Securities Board for allegedly offering unregistered securities products in the United States through their yield-bearing services.
The board’s director of enforcement, Joseph Rotunda, said in a court filing that “these products are similar to the yield-bearing custodial accounts offered by Voyager Digital LTD et al., and the enforcement department is now investigating FTX trading, FTX US, and their principals, including Sam Bankman-Fried.”
Rotunda filed the claim with the bankruptcy court overseeing the potential sale of Voyager’s assets to FTX.
FTX did not immediately respond to a request for comment. The company told Bloomberg that “we have an active application for a license that has been pending and believe we are operating fully within the limits of what we can do in the meantime.”
“Possibly engaged in fraud”
“We are working exceptionally hard to ensure that Voyager customers get the best possible outcome – which we believe will happen if our offer to return assets to users is approved by the Voyager bankruptcy court,” the statement said.
Rotunda said he downloaded the FTX app to his phone and created an account. He described how he transferred $50 from his bank account and Ethereum from a 3.0 wallet to his FTX account
The filing cited a list of location restrictions on the FTX website that said “FTX does not board or provide services to personal accounts of current residents” of the United States, Cuba, Crimea and elsewhere.
Rotunda said the return program “seems to [be] an investment contract … and as such appears to be regulated as a security in Texas” and that FTX may “offer unregistered or unpermitted securities for sale in Texas.”
In addition, “FTX Trading and FTX US may not fully disclose all known material facts to clients prior to opening accounts and earning returns, and may thereby engage in fraud and/or make offers that contain statements that are materially misleading or otherwise likely to mislead the public, the complaint states
Rotunda said FTX US “should not be allowed to purchase the assets of the debtor unless or until” the commission determines whether FTX US is complying with the law.
