FDIC Calls Out FTX US, Other Crypto Firms to Stop Misleading Users About Deposit Protection

Federal Deposit Insurance Corporation (FDIC), an US government agency, was created Friday to stabilize the financial system in case of bank failures. issued Five cease-and-desist notices were sent to five crypto-related companies requesting that they stop misleading and falsely claiming that deposit insurance is available for their clients.

The FDIC ordered five firms behind certain crypto websites — including FTX US, Cryptonews.com, Cryptosec.info, SmartAsset.com, and FDICCrypto.com — to “take immediate corrective action to address false or misleading statements concerning whether their customers’ funds were insured by the federal agency.”

The Federal Deposit Insurance Act gives the FDIC the power to ban the use of its name or logo in order to suggest that customer funds are insured by the government.

In a statement, the regulator said: “Based upon evidence collected by the FDIC, each of these companies made false representations —including on their websites and social media accounts — stating or suggesting that certain crypto-related products are FDIC-insured or that stocks held in brokerage accounts are FDIC-insured.”

Concerning the case surrounding FTX.US, the FDIC’s letter cited a tweet from FTX. US President Brett Harrison that claims “direct deposits from employers to FTX and stocks are held in FDIC-insured accounts.”

In the second case, the cease and desist letter noted that SmartAsset.com identified FTX in its FDIC-insured exchange.

Generally, the agency regulator claimed that such claims are false statements and misleading statements implying FDIC-insured products.

The letters instructed the companies mentioned above to remove statements that suggested any firms deposited with FTX were FDIC-insured.

FDIC has granted these crypto-related businesses 15 days to respond to the requests by providing written confirmation.

So far, FTX.US and SmartAsset.com have responded and said they have removed such content from their respective company’s online presence.

Harrison tweeted on Friday that he deleted the post and said the content didn’t mean to indicate that crypto assets deposited in FTX are insured by the FDIC, but rather “USD deposits from employers were held at insured banks.”

Michael Carvin, CEO of SmartAsset and co-founder of the company, stated that “We are in contact with the FDIC in order to assess the matter. We have also removed the content at issue in between.”

Controversy Surrounding Voyager  

FDIC issued a Financial Institution Advisory Letter late last month informing the public that it does not insure assets of non-banking institutions such as crypto companies.

On 29Th FDIC July Voyager Digital, a cryptocurrency brokerage, was in conflict with Voyager Digital when the agency ordered Voyager Digital to stop telling clients their deposits were protected by the Federal Deposit Insurance Corporation. The agency stated that such claims are false.

Voyager made mention of its federally insured status via its website, social media accounts and mobile app.

FDIC has ruled that Voyager violated Federal Deposit Insurance Act. This Act prohibits anyone implying that deposits may be insured when they aren’t.

Voyager Digital has an account at Metropolitan Commercial Bank of New York. The FDIC stated that the account was insured.

However, the agency clarified that Voyager Digital customers who open and use accounts via the Voyager Digital platform do not have insurance.

Source: Shutterstock

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