State Regulators Crack Down on Voyager Digital's Crypto Interest Offering

The coordinated legal push resembles BlockFi's legal battle, which ended in a $100 million fine and pledges to register as a security.

AccessTimeIconMar 29, 2022 at 11:02 p.m. UTC
Updated May 11, 2023 at 4:40 p.m. UTC

Securities regulators in at least seven U.S. states are scrutinizing Voyager Digital (VYGVF) , the Canadian crypto investments firm, over its offering of interest-bearing crypto accounts, Director of the Alabama Securities Commission Joseph Borg told CoinDesk on Tuesday.

The states – New Jersey, Alabama, Oklahoma, Texas, Kentucky, Vermont and Washington – believe Voyager Digital's "Earn Program" accounts may be unregistered securities, he said. They coordinated to file separate legal actions (including at least one "cease and desist") against the publicly traded firm.

"The thrust is to say, 'OK guys, it's time to come to the table," Borg said in a phone call.

The effort continues a yearlong battle by U.S. states to bring crypto interest accounts under their regulatory domain. BlockFi was the first company to fall under their microscope in July. It ultimately settled with state and federal regulators after paying a $100 million fine and promising to register its product as a security.

"There are some minor differences in the order but the principles are the same," Borg said of Voyager Digital and BlockFi.

He expressed surprise that Voyager Digital and others hadn't gotten the message of compliance the BlockFi precedent set.

Voyager responds

The investment firm said in a statement on Wednesday that it is "aware of or has received cease and desist orders from the state securities divisions of Indiana, Kentucky, New Jersey and Oklahoma, and orders to show cause or similar orders from the state securities divisions of Alabama, Texas, Vermont and Washington."

Voyager said it is in talks with the regulators to better understand the orders and clarify the statements it believes are inaccurate. When effective, the orders will stop the firm from offering new accounts or accepting new assets for its Earn program.

The company expects to receive a transition period before the orders come into effect.

"Voyager is firmly convinced that its Earn Program and the Voyager Earn Accounts are not securities and intends to demonstrate its position and defend it as necessary and appropriate. Of course, Voyager supports appropriate regulation and will do its best to demonstrate to these regulators that Voyager has complied with the law," the company said.

Voyager by the numbers

Voyager Digital has over $5 billion and 1.5 million clients wrapped up in its interest program, according to the New Jersey cease and desist order. The Garden State ordered Voyager Digital to stop opening new interest accounts but is allowing interest payments for existing accounts.

Alabama's order is slightly different, taking the form of a "show cause" filing that gives Voyager a window to defend itself against before the cease and desist order comes online. The states that moved Tuesday did a mix of show cause and cease and desist orders, Borg said.

Borg suggested that crypto interest accounts should be subject to the same regulatory scrutiny applied to other interest-bearing investment products. Without oversight, he said customers could have no guarantees their money was safe, secure, or even accessible.

"We want these folks to be in compliance," he said.

Voyager Digital CEO Steve Ehrlich did not pick up the phone.

UPDATE (March 30, 0:29 UTC): Adds information from Joseph Borg.

UPDATE (March 30, 11:30 UTC): Adds sub-header and details from Voyager's statement.


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Danny Nelson

Danny is CoinDesk's Managing Editor for Data & Tokens. He owns BTC, ETH and SOL.