Deal Between FTX And Voyager Draws Criticism And Investigation From Texas

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Last Updated on October 18, 2022 by Bitfinsider

Both FTX and Voyager Digital are now operating under the protection of a federal bankruptcy court. Texas is attempting to add constraints to the acquisition of assets from Voyager Digital by FTX on the grounds that both cryptocurrency exchanges are not complying with state regulations.

Documents that were submitted on Friday as part of the bankruptcy action revealed, among other things, that FTX and its principals, including CEO Sam Bankman-Fried, are the subject of an investigation by the Texas State Securities Board. In its limited opposition to the asset purchase, the state argued that FTX and Voyager are running companies that include the transportation of money without holding the necessary permits.

The securities board and the Texas Department of Banking want to add language to the sale agreement that specifies that Voyager remains liable for unlawful conduct that occurred after the bankruptcy petition was filed but before the sales transaction closes and that requires FTX to comply with state law prior to beginning business there. This language would also require that Voyager remain liable for unlawful conduct that occurred after the bankruptcy petition was filed but before the sales transaction closes.

FTX, whose U.S. subsidiary last month agreed to pay $1.4 billion to acquire Voyager’s cryptocurrency assets and use them to help bail out investors in an effort to gain new customers, denied the state’s allegation that it was operating in an improper manner. The agreement was made after FTX’s U.S. subsidiary in the United States last month agreed to pay $1.4 billion to acquire Voyager’s cryptocurrency assets.

According to a statement made by a spokeswoman for FTX to Forbes, “We have an active application for a license which has been pending,” and “we believe we are functioning fully within the confines of what we can do in the interim.” According to the corporate spokeswoman, discussions with the state have been going on “for a time,” and the company intends to keep cooperating with the state’s regulatory authorities.

In a separate declaration, the director of enforcement for the securities board revealed that an investigation is underway into whether or not FTX US, its parent company FTX Trading, Bankman-Fried, and two other executives may have “offered unregistered securities in the form of yield-bearing accounts to residents of the United States.” It was also mentioned that the accounts appear to be comparable to investments that Voyager provides.

The director of enforcement, Joseph Jason Rotunda, stated that he was able to transfer $50 from his bank account to an account he formed with FTX US on Friday, citing his residence in Austin as the mailing address for the transaction. Following that, he moved 0.1 ether, which at the time was equivalent to approximately $130 USD, from a cryptocurrency wallet to the account. He stated that the processing time for the ether transmission was only minutes, whereas the cash transfer may take up to six days.

According to Rotunda, the FTX app notified him that he was eligible to earn a yield of up to 8% a year on his deposits. However, the app made it clear that the money was coming from FTX US rather than FTX Trading and that it was only available “on a promotional basis” to users in the United States. Rotunda said that he was surprised by the news.

According to him, the yield program “appears to be an investment contract,” and as such, it ought to be subject to the registration requirements for securities that are imposed by the state of Texas. According to him, the FTX firms were not registered to market securities in the state of Texas, and neither was the yield program registered with the state. In addition to this, the statement brought up the danger of fraud because there was a lack of required disclosures given to prospective customers before they opened accounts.

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