Summary: US banking regulators have instructed the crypto firm Voyager Digital to cease and desist from making "false" and "misleading” claims regarding their customers’ funds being protected by the government. In reality, the company simply had a deposit account with the Metropolitan Commercial Bank, and clients investing through the company's platform did not have FDIC insurance, ...
US banking regulators have instructed the crypto firm Voyager Digital to cease and desist from making "false" and "misleading” claims regarding their customers’ funds being protected by the government.
In reality, the company simply had a deposit account with the Metropolitan Commercial Bank, and clients investing through the company's platform did not have FDIC insurance, regulators said.
”Based on the information gathered to date, it appears that these representations likely misled and were relied upon by customers who placed their funds with Voyager and do not have immediate access to their funds,” the regulators said in a joint statement.
After ordering the crypto lending platform to stop making false claims, the agency is now telling everyone else what not to do. The agency, which maintains an insurance fund to pay depositors when their banks fail, does not extend those protections to failed cryptocurrency firms used by those banks, according to an FDIC letter to banks released Friday.
“In their dealings with crypto companies, insured banks should confirm and monitor that these companies do not misrepresent the availability of deposit insurance in order to measure and control risks to the bank, and should take appropriate action to address such misrepresentations,” the agency said.
The day after Voyager Digital was asked to drop its claims that customer funds were protected by the US government. The Federal Deposit Insurance Corporation has issued a broader warning to bankers that they must keep their crypto partners in check.
“FDIC insurance does not protect a nonbank’s customers against the default, insolvency, or bankruptcy of any nonbank entity, including crypto custodians, exchanges, brokers, wallet providers or other entities that appear to mimic banks but are not,” the agency instructed.
The FDIC guidance added that if a bank’s crypto partner “makes misrepresentations about the nature and scope of deposit insurance,” there could be legal risks for that regulated lender.
The FDIC and Federal Reserve this week sent a letter to Voyager CEO Stephen Ehrlich, accusing the crypto lender of misleading customers about its asset protection by implying that in the event of a collapse, Voyager would be covered by deposit insurance.
However, the letter came too late for Voyager customers, who are now struggling to get their money back as the company goes through bankruptcy court.
A company spokesman refused to immediately respond to a request for comment.
This whole incident has also raised questions on social media platforms. A user on twitterr speculated "Voyager has lost customer assets, it still has most of them left; So, why haven't they been returned to customers yet?"
Author: Garrett Meifert