FTX US Spread False or Misleading Statements About FDIC-insured Products, Regulator Says

On August 19, the Federal Deposit Insurance Corporation (FDIC) issued various termination and withdrawal letters to five cryptocurrency companies including FTX US, owned by crypto billionaire Sam Bankman-Fried, along with newsletters Cryptonews.com, Cryptosec.info , SmartAsset. com and the FDICCrypto.com website.

The FDIC has asked the aforementioned companies to stop making “false or misleading claims” regarding their relationship with the FDIC.

According to the FDIC, FTX US and the other companies claimed that some cryptocurrency-related products or services they offered were insured by the FDIC.

One such company even misleadingly registered a domain in which it “suggests affiliation or approval by the FDIC,” an activity totally prohibited by the Federal Deposit Insurance Act (FDI Act). FDICCrypto.com redirects to a site that offers a variety of services, including a cryptocurrency service provider.

a hand holding a stack of "cryptocurrency bills"
One of the “cryptographic services” offered by FDICCrypto.com included physical cryptographic bills. Source: Chsserviceprovider

FTX Us may have violated federal deposit insurance law

According to the FDIC, FTX US and its related entities may have violated FDIC laws by making “false and misleading statements, directly or implicitly, regarding the deposit insurance status of FTX US.”

Apparently, on July 20, 2022, Brett Harrison, president of FTX US, tweeted on his official account stating that the company’s employees’ direct deposits were stored in individually insured bank accounts by FDIC. His exact words about him, as quoted by the FDIC, were:

“Direct deposits from employers to FTX US are held in individually FDIC insured bank accounts in your name”, … “shares are held in FDIC and SIPC insured brokerage accounts.”

Additionally, the FDIC indicated that FTX.US presented itself as an “FDIC-insured” cryptocurrency exchange on the SmartAsset.com website and CryptoSec.Info.

Brett Harrison: “Happy to work directly with the FDIC”

The FDIC has made it clear that it does not insure any type of brokerage account and does not cover any type of stocks or cryptocurrencies. Hence, the information promoted by FTX US is totally false, so they could take legal action against the exchange for abusing the FDIC name.

Therefore, FTX US has 15 business days from the publication of the release to provide a written letter to the FDIC showing compliance with the requests made, detailing all efforts made to remove all material that links them to the FDIC. Failure to comply with the request could result in further legal action for the exchange.

Similarly, Cryptonews.com received a termination and desist letter from the FDIC for posting fake reviews on cryptocurrency exchanges such as Coinbase, Gemini, and eToro, noting that they are regulated and insured by the FDIC.

Brett Harrison, president of FTX US, acknowledged today that he actually wrote the tweet and made it clear erased it at the request of the FDIC. Harrison then added that FTX US acted in good faith and underlined the exchange’s commitment to work hand in hand with US regulators:

Tweet from US FTX President Brett Harrison.  Source: Twitter
Source: Twitter

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