FTC Resolves Case with Voyager Digital, Sues Former CEO Over Misleading FDIC Claims
It's important to clarify that Voyager Digital is not a bank or financial institution, and as such, the deposits made by consumers with Voyager were not eligible for FDIC insurance.
In a recent development, the Federal Trade Commission (FTC) has announced a settlement with Voyager Digital, a crypto company, while concurrently filing a lawsuit against its former CEO, Stephen Ehrlich. The lawsuit revolves around allegations of misleading claims made by Voyager Digital, suggesting that customers' accounts were insured by the Federal Deposit Insurance Corporation (FDIC). These deceptive assertions lured consumers into depositing their funds with the company.
As per the FTC's complaint, Voyager had engaged in this misleading practice from at least 2018 until its declaration of bankruptcy in July 2022. Subsequently, consumers were left without access to significant assets they had entrusted to Voyager, including ongoing salary deposits, college tuition funds, and down payments for homes. The fallout resulted in consumers losing over $1 billion in cryptocurrency assets.
It's important to clarify that Voyager Digital is not a bank or financial institution, and as such, the deposits made by consumers with Voyager were not eligible for FDIC insurance. The complaint underscores that the FDIC does not insure cryptocurrency assets, and, in reality, consumers' cash deposits were placed in an account held by Voyager at a traditional bank, which also issued debit cards on behalf of Voyager. The protection of consumers' cash was contingent on the traditional bank's financial stability, while their cryptocurrency holdings remained unprotected.
Notably, Voyager was cognizant of the potentially misleading nature of its claims, as evidenced by communication in 2021 when the bank where Voyager held consumers' funds expressed concerns about the misleading nature of these claims. Voyager made some modifications to its cardholder agreement but continued with its misleading advertising until receiving a cease-and-desist letter from the FDIC.
In a separate action, the Commodity Futures Trading Commission has charged Stephen Ehrlich with fraud and registration failures. In the FTC case, the proposed settlement with Voyager and its affiliates permanently bars them from offering, marketing, or promoting products or services related to the deposit, exchange, investment, or withdrawal of any assets. The companies have also agreed to a suspended judgment of $1.65 billion, facilitating the return of remaining assets to consumers during bankruptcy proceedings. Notably, Stephen Ehrlich has not agreed to a settlement, and the FTC's case against him will proceed in federal court.
In addition to the asset handling ban, the proposed settlement prohibits the companies from misrepresenting the benefits of their products or services, making false representations to obtain customer financial information, and disclosing nonpublic personal information about consumers without their explicit consent.
In a recent development, the Federal Trade Commission (FTC) has announced a settlement with Voyager Digital, a crypto company, while concurrently filing a lawsuit against its former CEO, Stephen Ehrlich. The lawsuit revolves around allegations of misleading claims made by Voyager Digital, suggesting that customers' accounts were insured by the Federal Deposit Insurance Corporation (FDIC). These deceptive assertions lured consumers into depositing their funds with the company.
As per the FTC's complaint, Voyager had engaged in this misleading practice from at least 2018 until its declaration of bankruptcy in July 2022. Subsequently, consumers were left without access to significant assets they had entrusted to Voyager, including ongoing salary deposits, college tuition funds, and down payments for homes. The fallout resulted in consumers losing over $1 billion in cryptocurrency assets.
It's important to clarify that Voyager Digital is not a bank or financial institution, and as such, the deposits made by consumers with Voyager were not eligible for FDIC insurance. The complaint underscores that the FDIC does not insure cryptocurrency assets, and, in reality, consumers' cash deposits were placed in an account held by Voyager at a traditional bank, which also issued debit cards on behalf of Voyager. The protection of consumers' cash was contingent on the traditional bank's financial stability, while their cryptocurrency holdings remained unprotected.
Notably, Voyager was cognizant of the potentially misleading nature of its claims, as evidenced by communication in 2021 when the bank where Voyager held consumers' funds expressed concerns about the misleading nature of these claims. Voyager made some modifications to its cardholder agreement but continued with its misleading advertising until receiving a cease-and-desist letter from the FDIC.
In a separate action, the Commodity Futures Trading Commission has charged Stephen Ehrlich with fraud and registration failures. In the FTC case, the proposed settlement with Voyager and its affiliates permanently bars them from offering, marketing, or promoting products or services related to the deposit, exchange, investment, or withdrawal of any assets. The companies have also agreed to a suspended judgment of $1.65 billion, facilitating the return of remaining assets to consumers during bankruptcy proceedings. Notably, Stephen Ehrlich has not agreed to a settlement, and the FTC's case against him will proceed in federal court.
In addition to the asset handling ban, the proposed settlement prohibits the companies from misrepresenting the benefits of their products or services, making false representations to obtain customer financial information, and disclosing nonpublic personal information about consumers without their explicit consent.
