Sec has taken legal action against caroline ellison, former ceo of ftx’s affiliate trading firm alameda research, and gary wang, an ftx co-founder, for securities fraud. in december 2020, the us securities and exchange commission (sec) secured a ruling from a federal court that the blockchain-based publishing platform lbry may have been offering its native token lbc as a security. the sec has also labeled the token ftt as an “illiquid crypto asset security” and sec chair gary gensler has stated that ftt is “an exchange crypto security token that was integral to ftx”.
Sec’s approach to security regulation has escalated its assault on the crypto economy with this case. the sec’s current case against ftx is set in the u.s. district court for the southern district of new york and the sec had an ongoing case against blockchain payments company ripple labs. the sec has achieved a victory against lbry in the u.s. district court for the district of new hampshire.
Sec’s case against ftx appears to be resolved as ftx’s founders ellison and wang have pled guilty to all charges. the sec’s approach to security regulation could mean a potentially substantial escalation in the agency’s efforts to regulate the crypto industry. the sec could target any intermediary that sells crypto tokens like ftt in any context, which could expose major crypto exchanges like coinbase, kraken, and binance to immense legal liability. this is why the sec has changed its approach and is now targeting marketplaces and intermediaries instead of projects.