The US Federal Deposit Insurance Corporation has issued warning letters to FTX and four other cryptocurrency companies.
The letters from the FDIC demanded that the exchange stop making false claims about deposit insurance. The FDIC said the companies made false claims, leading customers to believe their crypto products were insured by the FDIC.
Stop deceiving consumers
The most prominent of the companies that have received the FDIC notice is the cryptocurrency exchange FTX led by Sam Bankman-Fried. The exchange received a termination and desist letter from the company, telling the exchange to stop misleading consumers about the insurance status of their funds. The claims can be considered misleading because, unlike deposits held by US banks, cryptocurrencies held at brokers and exchanges are not protected or insured by the government.
The regulator has issued a press release stating,
“Based on evidence gathered by the FDIC, each of these companies has made false statements, including on their own websites and social media accounts, claiming or suggesting that certain cryptocurrency-related products are insured by the FDIC or that the shares held in accounts of brokerage are insured by the FDIC. The Federal Deposit Insurance Act (FDI Act) prohibits any person from representing or implying that an uninsured product is insured by the FDIC or from knowingly misrepresenting the extent and manner of deposit insurance. The FDI Act also prohibits companies from implying that their products are insured by the FDIC by using “FDIC” in the company name, in advertisements or in other documents. “
The FDIC previously ordered Voyager Digital, now bankrupt, to stop claiming that clients’ implicit deposits with the platform were insured by the FDIC. The FDIC guarantees only regulated bank accounts in the amount of $ 250,000 per account.
Other companies alerted by the FDIC
FTX was not the only company to receive letters from the FDIC, but other companies in the crypto space such as Cryptosec.info, SmartAsset.com, FDICCrypto.com, and Cryptonews.com also received letters from the FDIC. The FDIC said companies receiving the letter must take immediate corrective action to address misleading statements from the company or persons associated with the company. In addition, the agency also reminded companies that misrepresentation of information and the insinuation that uninsured products are insured by the FDIC is prohibited by the Federal Deposit Insurance Act.
Clarification on FTX problems
In its letter addressed specifically to FTX, the FDIC mentioned the tweet from US FTX chairman Brett Harrison, which stated that direct deposits are stored in FDIC-insured accounts. Harrison made it clear that he had since deleted the tweet and did not intend to indicate that crypto assets stored with FTX were secured by FDIC.
“We didn’t really intend to mislead anyone and didn’t suggest that FTX US itself, or crypto / non-fiat assets, take advantage of FDIC insurance. Hope this provides clarity on our intentions. Happy to work directly with FDIC on these important ones. subjects”.
Charges against FDIC
The FDIC was previously accused of taking extra steps to ensure banks don’t partner with cryptocurrency companies. These allegations against the FDIC were made by Republican Senator Pat Toomey, accusing the company of stifling banks and their efforts to expand and cater to the crypto space. Senator Toomey said in a letter addressed to the interim president of the FDIC, Martin Gruenberg, that whistleblowers in the senator’s office have come forward to say that the FDIC could be,
“improperly intervening to dissuade banks from doing business with legal companies related to (cryptographic) cryptocurrencies”.
Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial or other advice.