FTC sues bankrupt crypto firm Voyager’s CEO over false FDIC insurance coverage claims

After deciding on Thursday with the Federal Commerce Fee (FTC), bankrupt crypto firm Voyager is completely banned from dealing with customers’ belongings. However the authorities company additionally introduced on Thursday that it’s suing Voyager’s former CEO, Stephen Ehrlich, for falsely claiming that customers’ accounts had been FDIC insured.

When a financial institution or monetary service is FDIC insured, that implies that a prospects’ funds will likely be protected even when the financial institution fails. Whereas Voyager promised prospects this very important safety, these claims weren’t true, because the FDIC doesn’t insure crypto belongings in any respect.

“When the corporate failed, customers misplaced entry to vital belongings that they had saved, together with ongoing wage deposits, faculty tuition funds, and down funds for houses,” the FTC defined in a press release. Voyager’s prospects had been unable to entry their money accounts for over a month, and greater than $1 billion was misplaced in crypto belongings.

Voyager filed for chapter in July 2022, citing risky crypto costs and the chapter of Three Arrows Capital (3AC), a crypto hedge fund that owed Voyager $650 million.

As a part of the settlement, the FTC is fining Voyager for $1.65 billion, however the fantastic is suspended in order that the defunct firm can use that cash to pay again prospects as a substitute. In a parallel submitting, the CFTC can be charging Ehrlich with fraud and registration failures.

Authorities companies have been more and more litigious in relation to crypto firms, particularly in gentle of excessive profile failures just like the FTX collapse — at present, former FTX CEO Sam Bankman-Fried is on trial for fraud. Simply final month, the SEC charged Mila Kunis and Ashton Kutcher’s “Stoner Cats” NFT sequence for selling unregistered securities.