U.S. regulators order Voyager Digital to stop 'false and misleading' deposit insurance claims

© Reuters. FILE PHOTO: Representations of cryptocurrencies and Voyager Digital logo are seen in this illustration taken, July 7, 2022. REUTERS/Dado Ruvic/Illustrations

By Pete Schroeder

WASHINGTON (Reuters) -U.S. banking regulators have ordered crypto firm Voyager Digital to cease and desist from making "false and misleading" claims that its customers' funds were protected by the government.

The Federal Reserve and the Federal Deposit Insurance Corp (FDIC) sent a letter to the firm on Thursday, stating they believed that Voyager had misled customers by claiming their funds with the company would be covered by the FDIC.

A company spokesman did not immediately respond to a request for comment.

The regulators said the company, which declared bankruptcy earlier this month, and its executives had made various statements indicating that Voyager itself was FDIC-insured, that customers who invested in its cryptocurrency platform would have their funds insured, and that the FDIC would insure customers against the failure of Voyager itself.

In reality, the company simply had a deposit account at Metropolitan Commercial Bank, and customers investing via the company's platform had no FDIC insurance, the regulators said.

"Based on the information gathered to date, it appears that these 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 regulators said in a joint statement.

In a letter sent to company executives, the regulators ordered the company to remove all misleading statements within two business days of receiving the letter. The regulators added such action would not preclude the agencies from taking further action against the firm in the future.

Voyager was one of several crypto firms to struggle in the wake of broad crypto market turmoil. In its Chapter 11 bankruptcy filing earlier this month, Voyager estimated that it had more than 100,000 creditors and between $1 billion and $10 billion in assets, as well as liabilities of the same value.