According to letters from authorities released this week, federal regulators have ordered cryptocurrency brokerage Voyager Digital to stop informing customers that their deposits are insured against losses by the Federal Deposit Insurance Corporation since that is untrue.
On its website, smartphone app, and social media pages, Voyager has made note of the fact that it is federally insured.
“Your USD is held by our banking partner, Metropolitan Commercial Bank, which is FDIC insured, so the cash you hold with Voyager is protected,” Voyager’s website said Friday, claiming deposits are “FDIC insured on USD $250,000.”
However, those assertions “are inaccurate and misleading,” according to a letter from the FDIC and the Federal Reserve to Voyager on Thursday. The corporation was required to remove such assertions from its website and social media platforms and to provide written verification by Monday that they had done so.
Customers who put money with Voyager but do not now have access to it were “likely deceived and relied upon” according to the letter.
Customers were unable to access their money when Voyager ceased all activities earlier this month and filed for Chapter 11 bankruptcy a few days later. In court filings, Voyager claimed that “prolonged volatility and contagion” in the bitcoin market had affected the company. According to court filings, it had around $110 million in cash when bankruptcy procedures began.
The FDIC revealed to Bloomberg News earlier this month that it was looking into the manner Voyager advertised to clients.
Voyager is allegedly breaking the Federal Deposit Insurance Act, which forbids anybody from falsely representing that deposits are covered. According to the FDIC, Voyager Digital has a bank account with Metropolitan Commercial Bank of New York that is insured, however consumers who establish and use accounts on the Voyager Digital platform are not covered by this insurance.
Founded in 2018, Voyager offers users a smartphone app via which they may trade more than 100 different types of cryptocurrency.
The market’s fall has severely hurt a number of businesses with a concentration on cryptocurrencies, including Voyager. This month, following a crypto crisis that drastically reduced the value of digital currencies like bitcoin and ethereum, Celsius Network filed for bankruptcy protection. This month, Singaporean cryptocurrency lender Vauld also declared bankruptcy.