Sam Bankman-Fried and FTX US are under investigation by the Texas Securities Commission

• FTX US and CEO Samuel Bankman-Fried hit by Texas State Securities Board investigation.
• The Board is reviewing crypto yield farming accounts offered by FTX US.
• FTT, the native token for the FTX exchange, continued its decline, down 57.8% over the past year.

The Texas State Securities Board believes that FTX’s crypto yield program is an investment treaty and should be regulated as a security. FTT price plunged in response to news of investigations into FTX CEO and the exchange.

Also read: DeFi token holders warn: Ribbon Finance’s lending product poses risks, analyst argues

If FTX US offers unregistered securities, Texas regulator weighs

The Texas State Securities Board claims that the FTX US exchange’s program of return is the offering of unregistered securities in the form of high-yield accounts to US residents. Joseph Jason Rotunda, director of enforcement at the Texas State Securities Board, believes FTX’s yield program needs to be regulated as a security.

The Howey test is used to determine what qualifies as an “investment contract” and is therefore subject to US securities laws. In applying the Howey test, investments are designated as securities when management expects profits.

State securities regulators have prosecuted companies offering crypto yield farming products like those offered by the FTX exchange and Voyager. When selling unregistered securities, sellers typically do not disclose the risks involved to investors. In such cases, products turn out to be fraudulent, which is a cause for concern.

Rotunda believes that securities regulators should not have allowed FTX to buy Voyager’s assets until they could determine that they comply with the law. It remains unclear whether FTX-US or Bankman-Fried violated securities laws, and investigations are ongoing. No formal charges have yet been filed against the giant.

The FTX exchange’s native token FTT saw its price drop. The FTT price has collapsed by 4% in the last 30 days. At press time, the FTT token is trading at $23.66 and is down 4.5% over the past fortnight. Panic selling ensued in response to news of investigations into the FTX exchange and Samuel Bankman-Fried.

Learn Crypto Trading, Yield Farms, Income strategies and more at CrytoAnswers
https://nov.link/cryptoanswers