U.S. Banking Regulators Order Voyager to Remove Misleading Insurance Statements
Amid the troubles surrounding cryptocurrency lender Voyager Digital, United States banking regulatory bodies have ordered the company to correct misleading statements suggesting that customers’ funds were FDIC-insured.
FDIC and the Fed Call Voyager’s Insurance Claims “False and Misleading”
A joint letter issued by the Federal Deposit Insurance Corporation (FDIC) and the Board of Governors of the Federal Reserve system, stated that Voyager claimed that the company was insured by the FDIC, customers’ investments in the firm were insured, and “the FDIC would insure customers against the failure of Voyager
itself.”
However, the regulators stated that Voyager’s statement was “false and misleading”. An excerpt from the letter said:
“These representations are false and misleading and, based on the information we have to date, it appears that the representations likely misled and were relied upon by customers who placed their funds with Voyager and do not have immediate access to their funds.”
The FDIC earlier launched an investigation into the crypto lending firm, over claims that users’ funds were FDIC-insured through its partnership with Metropolitan Commercial Bank (MCB). MCB, which has FDIC insurance coverage, however, clarified that the insurance only protects against the failure of the bank and does not cover Voyager.
Meanwhile, the banking regulators ordered the cryptocurrency lender to take corrective measures to address the untrue statements made about being insured. The Fed and the FDIC also asked Voyager to provide a written proof showing that the firm has complied with the order and made necessary corrections, within two business days of receiving the letter.
“Such confirmation shall detail the efforts that Voyager took to comply with this letter, including all steps undertaken by Voyager to identify and locate all such misrepresentations, and the scope of Voyager’s removal of the misrepresentations from its website, mobile app, Twitter accounts, and any other marketing, advertising, and consumer-facing materials and communications.”
However, the regulators noted that Voyager’s compliance will not prevent the banking regulators from taking any appropriate action.
Voyager Rejects Sam Bankman-Fried’s Buyout Proposal
In an update made in July 2022, Voyager clarified that it was not the one offering FDIC-backed insurance for customer deposits.
The crypto broker stated that it does not hold customer funds but instead the deposits are custodied with MCB. As a recognized lender, funds kept with MCB are FDIC-insured and this extends to Voyager customer deposits, the company clarified.
As previously reported by crypto.news, Voyager filed for bankruptcy protection on July 5, 2022, revealing a debt of $75 million owed to Alameda Research and nearly $1 million to Google.
Before the bankruptcy filing, Voyager revealed its exposure to another struggling firm, Three Arrows Capital (3AC), worth over $650 million in USDC and Bitcoin, with 3AC defaulting on its repayment.
Recently, Voyager’s bankruptcy lawyers refused the buyout offer from Sam Bankman-Fried’s FTX and Alameda, claiming that the proposal could be harmful to customers. In a court filing on July 24, the lawyers said:
“The AlamedaFTX proposal is nothing more than a liquidation of cryptocurrency on a basis that advantages AlamedaFTX. It’s a low-ball bid dressed up as a white knight rescue.”
Sam Bankman-Fried responded to the claims in a lengthy tweet thread, with part of the thread stating that customers get to be on the losing end due to the long process associated with bankruptcy proceedings.
