US regulators issued a joint letter ordering bankrupt cryptocurrency broker and lender Voyager Digital to stop trading as insured by the Federal Deposit Insurance Corporation, saying statements on its website and other sites were false and misleading.
The joint letter released July 28 by the Federal Reserve and the FDIC said the company’s statements “likely misled and relied on customers who placed their funds with Voyager and do not have immediate access to their background”.
Voyager filed for Chapter 11 bankruptcy protection earlier this month.
A spokesman did not immediately respond to a request for comment on the letter.
Voyager had marketed its accounts protected by this national safety net, attractive ground in the volatile world of cryptocurrency.
“In the rare event that your USD funds are compromised due to the failure of the company or our banking partner, you are guaranteed a full refund (up to $250,000),” Voyager wrote in 2019.
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On July 28, its website said, “Your dollars are in the hands of our banking partner, Metropolitan Commercial Bank, which is insured by the FDIC, so the cash you have with Voyager is protected.” Metropolitan Commercial is a small New York bank supervised by the Fed.
Individual customer accounts are eligible for insurance, but only in the event of a bank failure, not Voyager’s, Metropolitan Commercial said earlier this month. This is typical, as the FDIC only supports participating banks.
The confusion drew the attention of the FDIC, which began investigating Voyager’s marketing earlier this month, The Wall Street Journal previously reported.
Voyager’s website also says, “Cryptocurrency held on the Voyager platform is not protected by FDIC insurance or any other third-party or government-backed insurance.”
A Voyager spokesman said earlier this month that the company’s disclosure statement was not new.
Voyager’s bankruptcy came after the company was caught in a downward spiral in cryptocurrency prices that collapsed hedge funds and companies and drove down the value of their assets.
The company froze all activity, including withdrawals of $350 million in customer deposits held at Metropolitan Commercial. Voyager said customers would be able to access those dollars after “a fraud prevention and reconciliation process has been completed.”
—David Benoit contributed to this article.
Write to Andrew Ackerman at email@example.com
This article was published by Dow Jones Newswires, a service of the Dow Jones Group