Texas Securities Regulator Investigating FTX and Sam Bankman-Fried

FTX, CEO Sam Bankman-Fried investigated by Texas securities regulator

Texas’s securities regulator is investigating crypto trading platform FTX and its billionaire founder, Sam Bankman-Fried, for selling an investment product that potentially violated state law.

The probe, announced in a Friday filing by Texas State Securities Board enforcement director Joe Rotunda, centers on whether FTX has been illegally offering Texans accounts that pay interest on crypto deposits.

Rotunda argues that the accounts are akin to securities and that the company should have registered with the state before signing up its residents. It’s the latest attempt by state financial watchdogs to crack down on leading crypto players as federal policymakers remain divided about how to write rules for the industry.

Coinbase Threatens to Sue Crypto Traders Who Profited From Pricing Glitch

Coinbase, the world’s second-largest cryptocurrency trading platform by volume, is hinting it may sue about 1,000 users in the republic of Georgia for taking advantage of a pricing glitch.

On Aug. 29, about 1,000 Coinbase users in the country straddling Europe and Asia exploited the “arbitrage opportunity” when the lari, the local currency, was priced at $290 rather than $2.90 for about six hours on Coinbase. The group constitutes only 0.001% of the U.S.-based company’s users.

The glitch was a fault of a “third party,” Coinbase told CoinDesk then, without identifying the company. As such, the incident illustrates a longstanding concern of financial regulators: The risks posed to institutions by external partnerships.

Every Buck You Lend, Every Text You Send, the SEC’ll Be Watching You

Take one look at your phone and count how many different message apps you have. WhatsApp, Facebook Messenger, Snapchat, Telegram, Signal, iMessage. Those are just some of the most popular messaging applications available right now and chances are you have more than one of those on your phone right now. If you are in the financial services industry, beware. Last week it was reported that the U.S. Securities and Exchange Commission’s recent investigation of broker-dealers for violation of regulations relating to use of personal messaging devices, such as WhatsApp—which resulted in over $1.8 billion in fines to 16 financial institutions—has broadened to include investment funds and advisers.

According to individuals familiar with the inquiry, the SEC has issued document requests and preservation notices to a number of investment funds and advisers relating to their policies regarding employee use of personal devices and messaging platforms.

More on SEC, Auditors, and Fraud Risk

Let’s state that again more simply. Munter is telling people that even small amounts of fraud that are immaterial in dollar terms could still be material issues that investors would want to know about, because the fraudulent transactions suggest deeper problems in the company’s system of internal controls. So auditors should be more diligent in investigating the root cause of every erroneous financial transaction they find, and in assessing internal controls with a cynical eye that assumes management might commit fraud.

At an abstract level, his point makes sense. In practice, however, his point is likely to meet resistance from auditors, who will say they can only do so much to find fraud.

Elizabeth Holmes bids for new trial as ex-Theranos aide stands by testimony

A key witness in a trial that led to the conviction of disgraced Theranos CEO Elizabeth Holmes adamantly stood by his testimony during an unusual court appearance Monday. The prosecution witness, former Theranos lab director Adam Rosendorff, made a remorseful appearance at Holmes’ Silicon Valley home after the trial, raising questions about potential misconduct.

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Monday’s hearing provided what might be the final opportunity for Holmes to avoid prison if her legal team can persuade US District Judge Edward Davila she deserves a new trial, based on the Rosendorff’s conduct. Rosendorff spent six days on the witness stand last year testifying for the prosecution during Holmes’ trial.

DAOs Aren’t People, Crypto Lawyers Tell Court in CFTC’s Ooki Case

Decentralized autonomous organizations (DAOs), collectives that typically govern activities by voting through the use of crypto tokens, are not people and should not be treated as such, a group of lawyers and developers told a California court Monday.

LeXpunK Army, a group that received permission to file an amicus – or friend of the court – brief in the ongoing Commodity Futures Trading Commission (CFTC) lawsuit against Ooki DAO, argued that the federal regulatory agency should be required to identify and directly serve any people it believes has violated federal law, rather than the DAO as an entity.