Fed and FDIC order Voyager Digital to stop lying to customers

The two institutions described as “false and misleading” Voyager’s claims for deposit insurance. Voyager Digital allegedly lied to its customers by telling them that the government insured its deposits.

The Federal Reserve and the Federal Deposit Insurance Corporation have issued a cease and desist order urging the troubled cryptocurrency lender to stop telling customers that their funds are government insured. In a joint letter released on Thursday, US banking regulators said the bankruptcy broker had made various statements “false and misleading” regarding the FDIC insurance status of the company and its customers’ deposits. The letter says:

“Voyager has made various statements online, including on its website, mobile app, and social media accounts, claiming or suggesting that: (1) Voyager itself is FDIC insured; (2) clients who invested with the Voyager cryptocurrency platform would receive FDIC insurance coverage for all funds provided to, held by, on, or with Voyager; and (3) the FDIC would insure customers against the bankruptcy of Voyager itself. “

Voyager has repeatedly claimed that its funds are FDIC insured. “US dollars held at Voyager are FDIC insured up to $250K. The safety of our customers is our top priority. Start growing your cryptocurrency portfolio today“, published the company on its website and in a tweet from November 2020.

On July 8, the FDIC investigated Voyager for claiming to be FDIC insured through its partnership with the Metropolitan Commercial Bank. Although Voyager maintained deposit accounts with the FDIC-insured bank, the agencies clarified that “Voyager itself is not FDIC insured.“, which means that the depositors were not protected against the bankruptcy of the broker.

According to the agencies, Voyager’s public statements likely misled many clients who invested with the company into the false impression that the government had insured their funds. Regulators ordered the broker to remove all public statements and references suggesting FDIC coverage for the company’s or its customers’ deposits and send a letter to the agencies outlining all steps it has taken to comply with the guideline.

Voyager filed for bankruptcy on July 6 after now-bankrupt hedge fund Three Arrows Capital defaulted on a $665 million loan from the broker. On July 22, cryptocurrency exchange FTX offered to buy the company’s cryptocurrency assets and loans — excluding loans to Three Arrows — and use them to immediately repay customers. affected by bankruptcy. However, Voyager’s lawyers turned down FTX’s takeover offer, which it called “a cheap offer disguised as a white knight rescue.”

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