On Wednesday, the U.S. Securities and Exchange Commission (SEC) filed a complaint stating that FTX’s exchange token, FTT, was sold as an investment contract and is considered a “security.” This move is expected to have significant implications for the industry.
According to the SEC’s complaint, “If demand for trading on the FTX platform increases, demand for the FTT token may also increase, which would benefit holders of FTT in proportion to their FTT holdings. The large allocation of tokens to FTX incentivized the management team to attract more users to the trading platform, which could increase demand for and the trading price of the FTT token.”
FTX Claims Proceeds From the FTT Token Sale Were Used To Fund Development
According to the US Securities and Exchange Commission, the FTX exchange claimed that it would use the proceeds from its token sale to fund marketing, business operations, development, and growth. Therefore, the FTT token can be considered an investment contract with profit potential.
The FTT’s “buy and burn” program was compared to stock buybacks, where revenues are used to repurchase and destroy the asset, thus increasing its value.
According to a press release from the SEC, Sam Bankman-Fried, Gary Wang, and Caroline Ellison, all former FTX and Alameda Research employees, did not contest the regulator’s claims as FTT holders have a good chance of making money from the exchange’s use of investor funds to increase value and demand for the common enterprise.
Impact of the News on FTT
Following the recent updates and new charges brought by the US SEC, the FTT price has reached a new all-time low. At press time, the native token of the FTX exchange was trading at $0.8958.
Impact of the News on Other Exchange Tokens
The news apparently did not affect the prices of other exchange tokens. DeFi Planet Crypto Analyzer shows that the price of Binance’s BNB token stayed the same after the news was released, dropping 0.17% to $248 during the Asian morning. The OKB token on OKX, on the other hand, increased by 1.3% to $22.82, while the HT token on Huobi decreased by 2% to $5.29.
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