U.S. Securities and Exchange Commission (SEC)in a statement made late Wednesday, FTX‘s stock market token FTTis sold as an investment contract and “securities” said that.
SEC Adopts FTX Token FTT as a Security
“If trading demand on the FTX platform increases, the demand for the FTT token may increase, such that any price increase in FTT will benefit FTT holders equally and in direct proportion to their FTT holdings,” the U.S. Securities and Exchange Commission wrote in its statement.
“The large allocation of tokens to FTX encouraged the FTX management team to take steps to attract more users to the trading platform, thereby increasing the demand for the FTT token and raising the transaction price.”
The U.S. Securities and Exchange Commission filed this claim with FTX co-founder. Gary Wang and former CEO of Alameda Research Caroline Ellison expressed in a statement against him.
“FTT materials made it clear that the efforts of FTX’s core management team will drive the growth and eventual success of FTX,” the statement said.
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FTT’s “buy and burn” program was also mentioned. Used by many other exchange tokens, this venture is akin to a stock buyback, where the proceeds from FTX will repurchase and burn FTT, thereby increasing its value.
In a press release by the agency, it was stated that Ellison and Wang admitted to various charges against them and did not dispute the SEC’s claims.
The two are also facing Department of Justice and Commodity Futures Trading Commission (CFTC) charges for their behavior at FTX and Alameda, respectively.
“FTT investors had a reasonable expectation to profit from FTX’s efforts to distribute investor funds to create a use for FTT and bring demand and value to their joint ventures,” the SEC added.
*Not investment advice.