Federal regulators have ordered cryptocurrency brokerage Voyager Digital to stop telling customers that their deposits are protected from losses by the Federal Deposit Insurance Corporation because that’s not true, according to letters from regulators sent this week.
Voyager has mentioned its federally insured status on its website, mobile app and social media accounts.
“Your USD is held by our banking partner, Metropolitan Commercial Bank, which is FDIC insured, so the cash you hold with Voyager is protected,” Voyager’s website said Friday, claiming deposits are “FDIC insured on USD $250,000.”
But those claims “are false and misleading,” officials from the FDIC and the Federal Reserve said in a letter to Voyager Thursday. The officials demanded that the company scrub those claims from its website and social media, and give written confirmation by Monday that they’ve done so.
Voyager’s claims “likely misled and were relied upon by customers who placed their funds with Voyager and do not have immediate access to their funds,” the letter said.
Voyager suspended all activity earlier this month and filed for Chapter 11 bankruptcy a few days later, leaving customers without access to their funds. Voyager said in court documents that it has been hurt by “prolonged volatility and contagion” in the cryptocurrency market. It entered bankruptcy proceedings with about $110 million in cash, court documents state.
The company did not immediately reply to a request for comment from CBS MoneyWatch on the FDIC letter.
The FDIC is a government agency tasked with guarding the public’s bank accounts — such as checking, savings and CDs — against unforeseen losses. Having a FDIC insured account means that anyone who has up $250,000 deposited into a bank would have their money reimbursed if the bank unexpectedly fails. However, speculative investments such as stocks and cryptocurrencies typically aren’t FDIC insured.
Earlier this month, the FDIC told Bloomberg News that it was probing the way Voyager was marketing itself to customers.
FDIC officials said Voyager is violating the Federal Deposit Insurance Act, which prohibits anyone from implying that deposits are insured when they’re not. Voyager Digital has a bank account with Metropolitan Commercial Bank of New York and that account is insured, the FDIC said, but customers opening and using accounts on the Voyager Digital platform are not insured.
Founded in 2018, Voyager allows investors to trade more than 100 different crypto assets via a mobile app.
Voyager is one of several crypto-focused companies that have been hammered by the market’s collapse. Celsius Network filed for bankruptcy protection this month after a crypto crash that decimated the value of digital currencies including bitcoin and ethereum. Cryptocurrency lender Vauld of Singapore also filed for bankruptcy this month.