The Federal Reserve and Federal Deposit Insurance Corporation have ordered the bankrupt crypto platform Voyager to stop misleading its customers about its deposit insurance status.
The Federal Reserve and Federal Deposit Insurance Corporation sent a cease and desist order to Voyager Digital Thursday. It ordered the crypto lender to stop misleading its customers and remove all references about being insured by the government.
According to the agencies, Voyager shared “false and misleading” claims and references about being FDIC-insured on multiple occasions.
The regulators also gave Voyager two days to reply with a letter outlining all the steps the firm has taken to comply with the order.
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The two institutions called Voyager’s deposit insurance claims “false and misleading.”
Voyager Ordered to Stop Misleading Customers
Voyager Digital allegedly lied to its customers that the government was insuring its deposits.
The Federal Reserve and the Federal Deposit Insurance Corporation have issued a cease and desist order urging the embattled crypto lender to stop telling its customers their funds are insured by the government. In a joint letter published Thursday, the U.S. banking regulators said that the bankrupt broker made various “false and misleading” statements about the FDIC insurance status of the firm and its customers’ deposits. The letter said:
“Voyager has made various representations online, including its website, mobile app, and social media accounts, stating or suggesting that: (1) Voyager itself is FDIC-insured; (2) customers 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 failure of Voyager itself.”
Voyager has claimed on multiple occasions that its funds are insured by the FDIC. “USD held with Voyager is FDIC insured up to $250K. Our customers’ security is our top priority. Start growing your crypto portfolio today,” the company posted in a November 2020 tweet.
On July 8, the FDIC probed Voyager for claiming it was FDIC-insured through its partnership with the Metropolitan Commercial Bank. While Voyager maintained deposit accounts with the FDIC-insured bank, the agencies clarified that “Voyager is not itself insured by the FDIC,” meaning that depositors were not protected against the broker’s failure.
According to the agencies, Voyager’s public claims likely misled many customers into investing with the firm under the false impression that the government had insured their funds. The regulators ordered the broker to immediately remove all public statements and references suggesting FDIC coverage of the firm or its customers’ deposits and send a letter to the agencies outlining all the steps it took to comply with the directive.
Voyager filed for Chapter 11 bankruptcy on July 6 after the now-bankrupt hedge fund Three Arrows Capital defaulted on a $665 million loan from the broker. On July 22, the cryptocurrency exchange FTX offered to purchase the firm’s crypto assets and loans—excluding loans to Three Arrows—and use them to reimburse customers affected by the bankruptcy immediately. However, Voyager’s lawyers refused FTX’s buyout proposal, calling it a “low-ball bid dressed up as a white knight rescue.”
Disclosure: At the time of writing, the author of this article owned ETH and several other cryptocurrencies.
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