According to the Texas State Securities Board, FTX’s crypto yield program should be governed as a security because it is an investment contract. The revelation of a probe into the FTX CEO and the exchange caused the price of FTT to plummet.
JUST IN: #FTX Exchange and CEO Sam Bankman-Fried are being investigated by Texas regulators over securities violations. pic.twitter.com/jDvIXtOoKp
— Vinco (@CryptoVinco) October 17, 2022
The FTX US exchange’s yield program, according to the Texas State Securities Board, offers US citizens interest-bearing accounts that contain unregistered securities. According to Joseph Jason Rotunda, Director of Enforcement at the Texas State Securities Board, the yield program offered by FTX needs to be treated like a security.
What meets the criteria for an “investment contract” and is consequently covered by US securities laws is determined by the Howey test. Using the Howey test, investments are classified as securities if the management expects to make money.
State securities regulators have begun going after businesses that provide crypto yield farming services, such as those provided by Voyager and the FTX exchange. Sellers of unregistered securities generally don’t inform buyers of the hazards involved. Products in these situations turn out to be counterfeit, which is a major source of worry.
Rotunda contends that until they could have verified FTX’s compliance with the law, securities regulators should not have permitted it to buy Voyager’s assets. FTX-US and Bankman-Fried have not yet been officially charged, and it is unclear whether they have broken any securities laws. The inquiry is still underway.
The price of FTT, the native token of the FTX exchange, decreased. The price of FTT has fallen 4% during the last 30 days. At the time of publication, the FTT token was trading at $23.66 and had lost 4.5% of its value over the previous 14 days. The news of the FTX exchange and Samuel Bankman-Fried probe led to panic selling.
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