OKCoin Accused by FDIC of Making False Claims About Customer Protections

The U.S. banking agency demanded the exchange halt “misleading representations” of backing from FDIC insurance.

AccessTimeIconJun 16, 2023 at 2:58 a.m. UTC
Updated Jun 17, 2023 at 1:19 a.m. UTC

OKCoin must scrub misleading statements that suggest its customers’ accounts are protected by the U.S. Federal Deposit Insurance Corp. (FDIC), the U.S. banking regulator ordered late Thursday, complaining the company is making false claims.

The FDIC has demanded OKCoin USA Inc., the San Francisco-based sister exchange to OKX, remove any offending claims from its site immediately or face a possible enforcement action for violating U.S. banking law, the FDIC said in its letter to CEO Hong Fang. It’s the latest of several such warnings to crypto firms from the banking watchdog.

“OKCoin is not FDIC-insured and the FDIC does not insure non-deposit products,” the agency said in its cease-and-desist demand. “By not distinguishing between U.S.-dollar deposits and crypto assets, the statements imply FDIC insurance coverage applies to all customer funds (including crypto assets).”

The agency cited three examples of “false and misleading representations,” including a mention on its website that the Provenance Blockchain’s HASH token on OKCoin had “received broad regulatory acceptance from the SEC, OCC, FED, and the FDIC” and a 2020 posting to the company’s website, where it advertised itself as “Licensed across the US with FDIC insurance on OKCoin accounts.” It also cited a company official’s Twitter post that “if you are in the US we offer FDIC insurance on USD deposits.”

The regulator previously sent similar orders to now-bankrupt Voyager Digital and to FTX.US, after then-President Brett Harrison suggested in a tweet that the company was covered by the regulator. The FDIC had also issued a broader warning to the crypto sector, saying FDIC protections focus only on banks, not crypto firms that have FDIC-insured bank accounts.

"A core principle at OKCoin is to respect applicable laws and regulations, and we remain committed to collaborating with stakeholders including regulators whenever possible," a spokesperson said in an emailed statement. "OKCoin is aware of this matter and is taking immediate action to assess the statements flagged by the FDIC and address them as necessary."

UPDATE (June 16, 07:45 UTC): Adds OKCoin response in last paragraph.

CORRECTION (June 17, 01:17 UTC): Corrects that Brett Harrison is the former president, not CEO of FTX.US.


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Jesse Hamilton

Jesse Hamilton is CoinDesk's deputy managing editor for global policy and regulation. He doesn't hold any crypto.