FDIC slaps bankrupt lender Voyager over deposit insurance claims

FDIC slaps bankrupt lender Voyager over deposit insurance claims

It has been 20 days since an investigation was launched into crypto lender Voyager Digital's marketing of its deposit accounts to users. Now US regulators have issued a cease-and-desist order to the bankrupt company.

In one Statement On Thursday, the Federal Deposit Insurance Corporation (FDIC) and the Federal Reserve Board announced that they jointly issued a letter to Voyager requesting that it cease making false and misleading statements regarding its FDIC deposit insurance status.

Voyager and certain employees are accused by authorities of making false statements online, including on its website, mobile app and social media accounts.

These representations, the watchdog said, include claims that Voyager is FDIC insured and that all user funds provided to and held by the lender, including crypto, are insured. Under the federal Deposit Insurance Act, companies and individuals are prohibited from marketing uninsured deposits as insured.

"These representations are false and misleading, authorities said in the statement. "Based on the information collected to date, it appears that these representations were likely misleading and relied on customers who placed their funds with Voyager and did not have immediate access to their funds."

Voyager, which has resisted a supposedly "low-value" takeover offer from Sam Bankman-Fried's companies FTX and Alameda Ventures, became the focus of an FDIC investigation on July 8 for publicly stating that its dollar deposits were insured in the event that the lender failed.

Voyager maintains a depository account for the benefit of its customers through its banking partner, Metropolitan Commercial Bank.

The lender itself is not insured by the FDIC, the agencies said, so customers who invested through Voyager's cryptocurrency platform would not receive insurance coverage in the event of a default.

Earlier this month, the lender filed for Chapter 11 bankruptcy after revelations that it was involved in the widespread contagion of the collapse of Singapore-based hedge fund firm Three Arrows Capital.

A 2019 statement on Voyager's website claimed that customers could receive a full refund following an event in which USD funds were at risk due to the failure of the lender or its banking partner.

This has now been changed so that in the “ rare event “If customer funds are at risk, they should be guaranteed a full refund of up to $250,000.

The watchdog is calling on Voyager to take “immediate corrective action” to address “false statements” regarding its status.

Meanwhile, the Toronto Stock Exchange has halted trading in Voyager shares and is now facing a full delisting.

The company's stock, which has plunged 75% in the past month, was also affected bumped from the US platform OTCQX International to OTC Pink Sheets, which have much lower reporting and disclosure requirements.

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