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Embattled FTX founder Sam Bankman-Fried has staved off a case alleging he broke Texas securities laws, after a judge ruled that the state regulator lacks jurisdiction to act against him.
The ruling came in a case brought by the Texas State Securities Board claiming Bankman-Fried offered unregistered securities through FTX’s yield-bearing cryptocurrency accounts and that he now owes refunds to Texas investors.
Administrative Law Judge Sarah Starnes has cancelled a Thursday hearing at which Bankman-Fried had been ordered to testify and has given the securities agency until March 1 to file an amended complaint. Joe Rotunda, the agency’s director of enforcement, didn’t return messages seeking comment on the ruling, and it isn’t clear whether he will refile.
But the case reflects the early efforts some states are making to recover money from FTX and Bankman-Fried in the wake of the crypto exchange’s implosion in November. The obstacles: a criminal fraud prosecution of Bankman-Fried and a sprawling FTX bankruptcy case.
“We’re not going to take actions that interfere with the criminal process,” Rotunda said in an interview last month, before the January 19 ruling. “But at the same time, we have a job to do.”
He added that he was “very happy to see the SEC move very, very quickly on FTX,” referring to the US Securities and Exchange Commission. “But not knowing how that was going to play out, and knowing that Sam Bankman-Fried was not himself in bankruptcy, we brought our case.”
Because of the twin federal cases, state securities regulators have largely delayed their own investigations of FTX. — Bloomberg.
Bongani Ndlovu
Online Reporter