According to a story from Bloomberg News that was published on February 2, former FTX CEO Sam Bankman-Fried was awarded an early win in a dispute addressing the securities laws of Texas.
During the month of October, the Texas State Securities Board (TSSB) submitted complaints against Bankman-Fried. The state securities authority stated at that time that Bankman-Fried had broken state securities legislation when FTX US supplied yield-bearing instruments to consumers located in the United States.
As Bankman-Fried does not now call Texas home, today, Texas judge Sarah Starnes issued a ruling finding that the state securities authority does not have jurisdiction over Bankman-Fried.
The hearing that was supposed to take place today before Judge Starnes about this subject has been canceled. Bankman-Fried was due to testify. Additionally, the judge will give the TSSB the opportunity to dispute the verdict by allowing them to submit an updated complaint prior to March 1. According to Bloomberg, the organization has not said whether or not it would appeal the conclusion of today’s vote.
Before the judge made his decision, the attorneys for Bankman-Fried questioned the position taken by the TSSB, stating that its charges simply said that Bankman-Fried controlled the numerous organizations associated with FTX. It is possible that other members of FTX did not divulge information to their consumers; therefore, it is possible that Bankman-Fried did not necessarily break Texas regulations himself.
According to Joe Rotunda, who serves as the Director of Enforcement for the Texas Securities Board, the opposite is true. He maintained that Bankman-Fried had made the decision for his firm to offer stocks to citizens of Texas and that as a result, he had “subjected himself to the jurisdiction of Texas’ courts.” However, it appears that Judge Starnes does not agree with this argument today.
In the end, the TSSB intended to use the fines it imposed in order to issue reimbursements to impacted FTX consumers. In the event that it had been successful, Bankman-Fried may have been subject to fines of up to $20,000 per infraction of state law and a penalty of up to $250,000 for each Texas person impacted who was 65 or older.
The investigation being conducted by the TSSB is independent of the current criminal investigation being conducted by the federal authorities against Bankman-Fried. In the past, Rotunda has stated that the activities of his agency would not impact the ongoing criminal investigation. In addition to this, he stated that the TSSB is proceeding with its investigation since Bankman-Fried is not personally bankrupt, in contrast to his firm, FTX, which is insolvent.
Bloomberg reported that other state authorities have, for the most part, refrained from taking action because of the criminal case involving Bankman-Fried and the bankruptcy case involving FTX.
