Following Thursday’s settlement with the Federal Trade Commission (FTC), bankrupt cryptocurrency company Voyager is permanently banned from managing consumer assets. But on Thursday, the government agency also announced it was suing former Voyager CEO Stephen Ehrlich for falsely claiming that users’ accounts were FDIC insured.
When a bank or financial service is FDIC insured, it means that customers’ funds will be protected even if the bank fails. Although Voyager promised customers this vital protection, these claims were not true because the Federal Deposit Insurance Corporation does not insure crypto assets at all.
“When the company went bankrupt, consumers lost access to significant assets they had saved, including current payroll deposits, college funds, and down payments on homes,” the FTC explained in its filing. Voyager customers were unable to access their cash accounts for over a month, and over $1 billion in crypto assets was lost.
Voyager filed for bankruptcy in July 2022, citing volatile cryptocurrency prices and the bankruptcy of Three Arrows Capital (3AC), a cryptocurrency hedge fund that owed Voyager $650 million.
As part of the settlement, the Federal Trade Commission fined Voyager $1.65 billion, but payment of the fine is on hold so the defunct company can instead use the money to pay back customers. In a parallel filing, the CFTC also charges Ehrlich with fraud and registration violations.
Government agencies are increasingly contentious when it comes to cryptocurrency companies, especially in light of high-profile failures such as the collapse of FTX—former FTX CEO Sam Bankman-Fried is currently on trial for fraud. Just last month, the SEC accused Mila Kunis and Ashton Kutcher’s “Stoner Cats” NFT series of advertising unregistered securities.