XRP holders are baffled as the SEC does not classify FTT as an unregistered security.
XRP holders have taken to Twitter to criticize the US Securities and Exchange Commission for failing to classify FTT as an unregistered security in its charges against Sam Bankman-Fried today.
The SEC complaint describes FTT as a “token” or “crypto asset.”
It bears mentioning that the SEC following the announcement of the arrest of SBF in the Bahamas yesterday at the behest of the US Department of Justice, disclosed that it would also be filing charges against the disgraced crypto founder.
In the complaint filed today, the SEC accuses SBF of defrauding investors in a years-long scheme from May 2019 that saw him divert billions in customer funds for his benefit and to expand his crypto empire. Per the complaint, the SEC claims that the SBF managed to raise over $1.8 billion from investors, $1.1 billion of which came from 90 US investors with false representations of FTX’s operations and its relationship with Alameda Research, its sister firm.
The complaint alleges that from the beginning, SBF commingled customer deposits and routinely diverted billions to Alameda to fund venture capital investments, purchase real estate, settle Alameda debts, etc. In addition, while presenting to investors that FTX maintained the highest industry and regulatory standards and treated Alameda as it did every other customer, SBF exempted Alameda from any risk controls. Moreover, according to the complaint, SBF offered them an “unlimited line of credit” funded with customer deposits.
However, in all these, what is of special interest to the XRP community is the classification of FTX Token (FTT), the illiquid token that SBF attempted to use to cover the hole in FTX’s balance sheet and inflate the valuation of the exchange and Alameda. The token had little utility outside the exchange, where holders used it to offset fees. FTX and Alameda were the largest holders, and consequently, most of FTT’s trading volume came from FTX and Alameda.
Despite these perceived red flags, the SEC classifies it as a crypto asset and does not charge SBF for selling an unregistered security, much to the chagrin of the XRP community. This is because, in contrast, the SEC classified XRP as an unregistered security, even though it runs on a decentralized network and boasts several use cases.
The best thing is that the @SECGov doen't charge @SBF_FTX for selling unregistered securities. The word unregistered appears 0 times. They also don't call FTT an unregistered security like XRP, but simply "token". FTT is sufficiently decentralized just like Bitcoin and Ethereum pic.twitter.com/KAeNxB3BJY
— stefan huber 🔥🦅🔥 (@Leerzeit) December 13, 2022
For several XRP community members, it highlights the inconsistency in the SEC’s enforcement actions and the lack of clarity in crypto regulations. As highlighted by CNBC Squawk Box anchor Andrew Sorkin, the very reason why the SEC is going after SBF for defrauding US investors and not customers is that FTX is registered abroad due to the lack of regulatory clarity.
Commodities Futures Trading Commission
It bears mentioning that the Commodities Futures Trading Commission has also filed fraud charges against SBF per a tweet from FOX Business reporter Eleanor Terrett moments ago. Notably, the CFTC is demanding a jury trial.
— Eleanor Terrett (@EleanorTerrett) December 13, 2022