Sam Bankman-Fried Faces Texas Hearing Over Securities Violations

Texas Securities Hearing: The Date Is Set

Mark your calendars folks, because February 2, 2023, is the day when the former FTX CEO, Sam Bankman-Fried, will face the music. The Texas State Securities Board, alongside its director of enforcement, Joe Rotunda, has summoned Bankman-Fried as part of an investigation into potential violations of Texas securities laws. And if anyone thought the drama around FTX was over, just wait.

Allegations: Unregistered Securities and More

The heart of this inquiry revolves around allegations that FTX.US sold unregistered securities to Texans through its so-called “EARN” accounts. It’s like being sold a ticket to a concert that’s not actually happening, but instead of refunding a disappointed audience, the show goes on. The Securities Board asserts that these actions violate Section 4003.001 of the Securities Act.

Request for Public Input

In a twist that would make any reality TV producer proud, Rotunda even took to Twitter on November 18 to solicit stories from former FTX clients in Texas. “If you’re a client of FTX and live in Texas, please reach out to me. We want to hear your story,” read his tweet. One can only imagine how many DM’s he received after that!

The Broader Implications of the Hearing

What’s at stake during this upcoming hearing? For starters, the Securities Board is looking to implement a Cease and Desist order to prevent FTX (you know, the one that’s already going through bankruptcy) from continuing any fraudulent activities in Texas. They are also hoping for a judge to mandate that Bankman-Fried repay Texan customers who fell for these enticing—but apparently illegal—yield-bearing schemes. Spoiler alert: it’s not a happy ending for those involved.

Possible Penalties: It’s Going to Cost

Should the ruling sway in favor of the Securities Board, Bankman-Fried might face an administrative fine not to exceed $20,000 per violation, with even harsher penalties for acts targeting elderly Texans—up to $250,000 for each of those dastardly deeds. Yikes! So, as he prepares to join the hearing via Zoom, one can almost picture him sweating bullets, contemplating how long he can hit the mute button.

A Look Back at Bankman-Fried’s Regrets

In a recent interview with crypto blogger Tiffany Fong, Bankman-Fried lamented over how he mishandled operations at FTX. “You don’t get into the situation we got in if you, like, make all the right decisions,” he stated, as if trying to convince himself he didn’t fall down every rabbit hole possible. Talk about a classic case of “I told you so!”