After reaching a settlement with the Federal Trade Commission (FTC), Voyager, a bankrupt cryptocurrency company, is permanently prohibited from managing consumer assets. The former CEO, Stephen Ehrlich, is also being sued by the FTC for making false claims that users’ accounts were FDIC insured. The company’s promise of FDIC insurance, which guarantees protection of funds even in case of bank failure, was misleading as the FDIC does not insure cryptocurrency assets. This resulted in customers losing access to significant amounts of money, including salary deposits, tuition funds, and home down payments.
Key Points:
- Voyager filed for bankruptcy in July 2022, citing volatile crypto prices and the bankruptcy of Three Arrows Capital, a crypto hedge fund that owed Voyager $650 million.
- The FTC is imposing a fine of $1.65 billion on Voyager, but the fine will be suspended to allow the defunct company to use the funds for customer restitution.
- In a parallel filing, the Commodity Futures Trading Commission (CFTC) is charging Stephen Ehrlich with fraud and registration failures.
Analysis: The FTC’s actions against Voyager and its former CEO highlight the increasing regulatory scrutiny facing cryptocurrency companies. The case underscores the importance of accurate and transparent information when dealing with financial assets, particularly in the cryptocurrency space where regulations and protections differ from traditional finance. This development reflects a broader trend of government agencies holding crypto companies accountable for their actions, especially in the wake of notable industry failures and legal challenges.
