SBF wins Texas case alleging violations of securities laws via FTX offerings SBF wins Texas case alleging violations of securities laws via FTX offerings
The Texas State Securities Board has no jurisdiction over the former FTX CEO.
2 min read
Updated: Aug. 3, 2023 at 3:13 am UTC
Cointelegraph / CC BY 3.0 / Wikimedia. Remixed by CryptoSlate
Former FTX CEO Sam Bankman-Fried gained an early victory in a case concerning Texas securities laws, according to Bloomberg News reported Feb. 2.
The Texas State Securities Board (TSSB) filed allegations against Bankman-Fried last October. At that time, the regulator said that Bankman-Fried had violated state securities law when FTX US provided yield-bearing products to customers in the United States.
Today, Texas judge Sarah Starnes ruled that the state securities regulator does not have jurisdiction over Bankman-Fried, who is not a resident of Texas.
Judge Starnes canceled a hearing scheduled for today that would have seen Bankman-Fried give testimony on the matter. The judge will also allow the TSSB to contest the decision by filing an amended complaint before March 1. Bloomberg said the agency has not indicated whether it will challenge today’s outcome.
Prior to the judge’s ruling, Bankman-Fried’s lawyers criticized the TSSB’s stance, arguing that its allegations only stated that Bankman-Fried controlled FTX’s various entities. Because other members of FTX may have failed to disclose information to customers, Bankman-Fried did not necessarily violate Texas regulations himself.
Joe Rotunda, the Texas Securities Board’s Director of Enforcement, said otherwise. He argued that Bankman-Fried had chosen for his company to sell securities to Texas residents and that he, therefore, “subjected himself to the jurisdiction of Texas’ courts” — an assertion that Judge Starnes apparently disagreed with today.
The TSSB ultimately aimed to provide refunds to affected FTX users by imposing penalties. Had it succeeded, Bankman-Fried may have faced fines up to $20,000 per state law violation and fines up to $250,000 for each Texas resident affected above the age of 65.
The TSSB’s case is separate from the federal government’s ongoing criminal case against Bankman-Fried. Rotunda previously said that his agency’s actions would not interfere with the criminal case. He also said that the TSSB brought its case forward because Bankman-Fried is not personally bankrupt — unlike his company, FTX, which is bankrupt.
Bloomberg noted that other state regulators have largely refrained from taking action due to Bankman-Fried’s criminal case and FTX’s bankruptcy case.
Mentioned in this article
Author 
Mike Dalton
Before transitioning to crypto writing in 2018, Mike studied library and information sciences. Currently, he resides on Canada's West Coast.
Latest US Stories
Featured Story
Advertise Here
In this article
FTX
FTX is a defunct cryptocurrency exchange, currently in bankruptcy proceedings, that was founded by Sam Bankman-Fried and Zixiao “Gary” Wang in May 2019.
Sam Bankman-Fried is the former CEO, and co-founder of defunct crypto exchange FTX and Alameda Research.
