Crypto Broker Voyager Ordered to ‘Cease and Desist’ Misleading Customers

Key Insights:

• The company has been claiming that it is covered by FDIC insurance.
• Only individual accounts at the Metropolitan Commercial Bank are protected. 
• Voyager has been ordered to remove any misleading statements.

Bankrupt crypto brokerage Voyager Digital has been sent a joint cease and desist letter from the Board of Governors at the Federal Reserve and Federal Deposit Insurance Corp. (FDIC).

The letter sent on July 28 warned that the firm’s statements “likely misled and were relied upon by customers who placed their funds with Voyager and do not have immediate access to their funds.”

It stated that Voyager made false claims about its insurance status, misleading clients over the protection of their assets. It explained that Voyager uses accounts at the Metropolitan Commercial Bank (MCB) in New York for customers who make USD deposits. The bank itself is insured by the FDIC, but Voyager is not.

Misleading Statements

The regulators accused the firm of making representations online, including its website, mobile app, and social media accounts, that it is insured by the FDIC. The firm also claimed that Voyager customers would receive FDIC coverage for their assets, and the insurance agency would cover clients against the failure of Voyager itself.

In 2019, Voyager wrote, “In the rare event your USD funds are compromised due to the company or our banking partner’s failure, you are guaranteed a full reimbursement (up to $250,000).”

This week, the Voyager website still claimed “the cash you hold with Voyager is protected,” however, it does warn that crypto assets held on the platform are not protected by FDIC insurance.

Metropolitan Commercial confirmed that individual accounts are insured but only for the bank’s failure, not Voyager Digital.

The letter demands that Voyager removes all misleading statements regarding its insurance status and report back within two days that it has complied.

Earlier this month, Voyager Digital filed for Chapter 11 bankruptcy a week after suspending withdrawals, trading, and deposits. It has frozen all activity, including withdrawals for around $350 million it holds in customer deposits at MCB.

Earlier this week, Sam Bankman-Fried’s FTX exchange made an early liquidity offer to Voyager customers. However, the firm’s lawyers labeled it as a “low-ball bid dressed up as a white knight rescue” that only benefits FTX.

Markets Rally on Rate Hike

Crypto markets are back in the green today in a move opposite to previous reactions to Federal Reserve rate hikes and negative GDP news.

Crypto markets usually slump after Fed rate hikes and recession reports, but total capitalization is up 3.6% on the day, reaching $1.14 trillion.

Bitcoin (BTC) has gained 2.9% on the day to trade at $23,842 at the time of writing. It is the highest price the asset has reached since mid-June. Ethereum (ETH) is performing even better, with a 3.8% rise to $1,719 during the Friday morning Asian trading session.