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SEC said that FTX sold its native FTT tokens as an investment contract and is a security

According to the US Securities and Exchange Commission (SEC), the buy-and-burn program started by the cryptocurrency exchange FTX and the FTT token’s operations are equivalent to stock buybacks and, as a result, comprise the behavior of securities.

sec-said-that-ftx-sold-its-native-ftt-tokens-as-an-investment-contract-and-is-a-security

FTX founder Sam Bankman-Fried

US SEC Declares FTX’s Native Token FTT as Security

They claimed that cryptocurrency exchange FTX offered its native FTT tokens as an investment contract and a “security” in a complaint submitted late on Wednesday, December 21.

The massive selling of FTT tokens by Binance and others triggered a significant downfall for the crypto exchange FTX. Since the FTX crisis unfolded in early November, the price of FTT tokens has collapsed by a staggering 98%.

“If demand for trading on the FTX platform increased, demand for the FTT token could increase, such that any price increase in FTT would benefit holders of FTT equally and in direct proportion to their FTT holdings. The large allocation of tokens to FTX incentivized the FTX management team to take steps to attract more users onto the trading platform and, therefore, increase demand for, and increase the trading price of, the FTT token”, in its recent analysis, the US SEC noted.

The SEC made this assertion in its lawsuit against Caroline Ellison, the CEO of Alameda Research, and Gary Wang, the co-founder of FTX. According to the SEC’s lawsuit, the token sale proceeds would be used by the cryptocurrency exchange FTX to finance its expansion, business operations, marketing, and development. The SEC has said unequivocally that FTT is an “investment” with profit potential.

“The FTT materials made clear that FTX’s core management team’s efforts would drive the growth and ultimate success of FTX,” said the SEC. Besides, the SEC has also mentioned the “buy and burn” program initiated by crypto exchange FTX.

According to the securities regulator, this initiative was comparable to many other crypto exchange tokens and stock buybacks. It would repurchase and burn FTT while raising its value using money from FTX.

Alameda Research CEO Caroline Ellison and FTX co-founder Gary Wang have pleaded guilty to criminal charges by the US Southern District of New York. Damian Williams, the attorney for the Southern District of New York, said that Ellison and Wang were charged “in connection with their roles in the frauds that contributed to FTX’s collapse.”

Both have stated that they will work with the prosecutors looking into the demise of FTX and Sam Bankman-Fried. Ellison and Wang have both been accused of fraud in the CFTC’s lawsuit against SBF and his businesses. The SEC also accused the two of participating in a multi-year scam to mislead equity investors on the FTX.

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