SBF wins Texas case alleging violations of securities laws via FTX offerings

Former FTX CEO Sam Bankman-Fried has won an early victory in a Texas securities lawsuit, according to Bloomberg News. report February 2.

The Texas Securities Commission (TSSB) filed a complaint against Bankman-Fried last October. At the time, regulators said Bankman-Fried violated state securities laws when FTX US offered yield products to U.S. customers.

Today, Texas Judge Sarah Stearns ruled that the state’s securities regulators do not have jurisdiction over Bankman-Fried, who is not a Texas resident.

Judge Stearns canceled a hearing scheduled for today at which Bankman-Fried was scheduled to testify in the case. The judge also allows TSSB to challenge the decision by filing an amended complaint by March 1.

Prior to the judge’s ruling, Bankman-Fried’s attorneys criticized the TSSB’s position, arguing that its allegations merely stated that Bankman-Fried controlled various entities in FTX. Bankman-Fried himself did not necessarily violate Texas regulations, as other members of FTX may not have disclosed the information to their customers.

Joe Rotunda, director of enforcement for the Texas Securities Commission, said not. He argued that Bankman-Fried “subjected itself to the jurisdiction of the Texas courts” because his company chose to sell securities to Texas residents⁠— Judge Starnes said Today, a claim that clearly disagreed.

TSSB ultimately aimed to provide refunds to affected FTX users by imposing penalties. If it succeeds, Bankman-Fried could face fines of up to $20,000 for each violation of state law, and could face fines of up to $250,000 for each affected Texas resident over the age of 65. may have been

The TSSB case is separate from the federal government’s ongoing criminal proceedings against Bankman-Fried. Rotunda had previously said his agency’s actions would not interfere in criminal cases.He also said that unlike his company, FTX, which went bankrupt, Bankman-Fried is personally bankrupt. TSSB has filed a lawsuit because it did not.

Bloomberg noted that regulators in other states have largely held back on action due to the Bankman-Fried criminal case and the FTX bankruptcy case.