Crypto lender Voyager Digital has been ordered by U.S. banking regulators to stop making incorrect claims that the company was insured by the government.
The Federal Reserve and Federal Deposit Insurance Corporation ordered Voyager to cease any representations that its customers' funds would be protected in case of the company's failure, according to a statement published Thursday.
"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," the letter said. "These representations are false and misleading and, based on the information we have to date, it appears that the representations likely misled and were relied upon by customers who placed their funds with Voyager and do not have immediate access to their funds."
“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 agencies said in their joint press release. The Toronto-based crypto lender collapsed earlier this month, filing for bankruptcy protection.
The regulators "demanded" that Voyager "immediately remove" any statements or references suggesting the company is FDIC-insured and send a letter to the Fed and FDIC confirming not only the removal of said references, but also what steps Voyager took to do so.
"If you believe that any statement you have made related to FDIC deposit insurance is true and accurate, please provide: (1) such written confirmation within two (2) business days from the receipt of this letter, and (2) a full listing of all such statements regarding deposit insurance on any medium or platform, together with information and documentation supporting the accuracy of all such statements, not later than ten (10) days from the date of this correspondence," the letter said.
The Fed and FDIC warned that they may still take further action if needed, without suggesting what that might look like.
The FDIC previously confirmed it was looking into claims that Voyager's customers' funds were FDIC-insured in the event the lender collapsed. In reality, only Voyager's own omnibus account at its New York bank was covered.
The government letter, sent to CEO Stephen Ehrlich, comes too late to protect the money customers entrusted to Voyager. At this stage, they're watching the bankruptcy courts and any further intervention from other firms, such as FTX.
Sam Bankman-Fried's trading platform made an early liquidity offer to Voyager customers, though lawyers for Voyager criticized it as a "low-ball bid dressed up as a white knight rescue" that only benefits FTX.
Bankruptcy court Judge Michael Wiles has already been hearing from customers such as Lisa Dagnoli of Massachusetts, who asked the presiding judge in a letter to "please hear the truth about their marketing, their spending, their fiscal activities, and the amount of money they have from people all over that are crushed financially because we trusted Voyager."
Nikhilesh De contributed reporting.
UPDATE (July 28, 2022, 22:15 UTC): Adds additional detail.
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