The ruling came in a case brought by the Texas State Securities Board claiming Sam Bankman offered unregistered securities through FTX’s yield-bearing crypto currency accounts and that he now owes refunds to Texas investors
Embattled FTX founder and former billionaire Sam Bankman-Fried has avoided a case alleging he broke Texas securities laws, following a ruling that the state regulator lacks jurisdiction to act against him.
The ruling came in a case brought by the Texas State Securities Board which claimed that Mr Bankman-Fried (SBF) offered unregistered securities through his firm’s yield-bearing crypto currency accounts and that he now owes refunds to investors in Texas.
Administrative law judge Sarah Starnes called off a February 2 hearing, at which SBF had been asked to give evidence, and has given the Texas State Securities Board until March 1 to file an amended complaint.
The case shows efforts some states are making to recover money from FTX and SBF after the crypto currency exchange’s implosion in November. The hurdles: SBF’s criminal fraud prosecution and FTX bankruptcy case.
State securities regulators have largely delayed their own investigations of FTX because of the ongoing federal cases, even though some states have taken a leading role in crypto currency enforcement over federal authorities in recent years.
Lawyers for SBF argue that the state board claims only that he run the different FTX entities and that certain FTX principals may not have revealed material information to customers of FTX, not that he breached any Texas securities regulations himself.
Ms Starnes agreed, stating that the state board did not meet the condition for establishing personal jurisdiction over a non-Texas resident.
Mr Rotunda told Ms Starnes that SBF ‘subjected himself to Texas courts’ jurisdiction when he decided his business enterprise would offer and sell securities to residents of Texas.
He said he was among those residents — a purchase he made as part of his investigation.
Mr Rotunda said the Texas probe in October court filings in the bankruptcy of Voyager Digital Holdings, in which he objected to the crypto exchange’s bid to buy Voyager.
Apart from seeking a refund of principal to Texan residents who invested in the alleged unregistered accounts, his agency asked for administrative fines to the tune of $20k per contravention of state securities laws and $250k for each illegal act involving a Texas resident aged 65 or more, as determined by the judge.
There have been a lot of people hurt, Mr Rotunda said. But the impact on Texas — while considerable, and considerable in the other 49 states — is going to be much less than what we saw in Voyager, what we saw in Celsius and what this could have been if it percolated for another couple months.
