The <a href="https://www.cryptoknowmics.com/news/sec-targets-atlas-trading-founders-for-alleged-twitter-and-discord-scam">U.S. Securities and Exchange Commission</a> <a href="https://www.sec.gov/litigation/complaints/2022/comp-pr2022-234.pdf" target="_blank" rel="nofollow noopener">stated</a> in a lawsuit filed late Wednesday that FTX's exchange <a href="https://www.cryptoknowmics.com/news/binance-to-liquidate-ftt-holdings-after-recent-disclosures">FTT</a> token was promoted as an investment contract and is a security, a claim that is certain to have a significant effect on the sector.
<h2>SEC Calls FTT Token a Security</h2>
The SEC complained that any value gain in FTT would enrich owners of FTT equally and in exact correlation to their FTT holdings. If interest in trading on the <a href="https://www.cryptoknowmics.com/news/auros-strike-by-ftx-crash-announces-provisional-liquidation">FTX</a> network rose, demand for the FTT token may grow, the <a href="https://www.cryptoknowmics.com/news/sam-bankman-fried-accused-by-us-sec-of-scamming-ftx-investors">SEC</a> noted in its complaint.

The substantial token distribution to FTX motivated the leadership team to pursue initiatives to enhance user engagement on the trading platform, which in turn increased competition for and raised the trading price of the FTT token.
<h2>FTX to Employ Profits from Token Sale</h2>
In a lawsuit brought by the SEC against Caroline Ellison, the former CEO of <a href="https://www.cryptoknowmics.com/news/alameda-research-to-repay-two-large-loans-denominated-in-bitcoin-and-ether">Alameda Research</a>, and Gary Wang, a co-founder of FTX, the SEC emphasized that FTX will utilize the profits from the token sale to support the creation, promotion, maintenance, and expansion of FTX while highlighting the fact that FTT is an "investment" with profit potential. The FTT documents made it obvious that FTX's core management team's work would fuel the company's development and eventual success.
<h2>Accusation Against Ellison and Wang</h2>
According to a press statement from the SEC, Ellison and Wang have both admitted guilt to the many accusations against them and do not dispute the SEC's claims.

In addition, the two are being prosecuted by the Justice Department and the <a href="https://www.cryptoknowmics.com/news/cftc-proclaims-ether-as-commodity-again-in-court-filing">Commodity Futures Trading Commission (CFTC)</a> over their actions at FTX and Alameda, respectively. According to the SEC, FTT investors had a realistic belief of benefitting from FTX's attempts to utilize investor monies to develop a purpose for FTT and provide demand and value to their shared company.

SEC Identifies FTX Exchange's FTT Token as a Security

The U.S. Securities and Exchange Commission stated in a lawsuit that FTX's exchange FTT token was promoted as an investment contract and is a security,

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SEC Identifies FTX Exchange's FTT Token as a Security

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