JERSEY CITY, N.J.–While credit unions and the National Credit Union Share Insurance Fund have yet to face the issue, the FDIC is investigating whether a crypto brokerage and lender misled consumers by implying its deposit accounts were federally insured.
Some customers of Voyager Digital, which has entered bankruptcy, have been surprised to learn their investments are not safe and may be lost.
The plunging prices of cryptocurrency have led to losses at the company. As a result, Voyager froze all activity, including withdrawals on $350 million in customer deposits that are stored at Metropolitan Commercial Bank, a small New York bank, according to the Wall Street Journal, which added Voyager told customers they would be able to access those dollars after “a reconciliation and fraud prevention process is completed.”
‘Guaranteed a Full Reimbursement’
According to the report, some customers online said they were only just learning their deposits weren’t insured by the Federal Deposit Insurance Corp. in the way they thought.
“In the rare event your USD funds are compromised due to the company or our banking partner’s failure, you are guaranteed a full reimbursement (up to $250,000),” Voyager told customers in 2019, according to the Journal.
As recently as last week, the company’s website said, “Your USD is held by our banking partner, Metropolitan Commercial Bank, which is FDIC insured, so the cash you hold with Voyager is protected.”
Only Bank Accounts Insured
The individual customer accounts are eligible for insurance, but only in the case of a failure of the bank, not Voyager, Metropolitan Commercial Bank stated, according to the Journal.
Voyager has what is known as a For Benefit of Customers account at Metropolitan Commercial Bank.
The FDIC said it is now looking into Voyager’s marketing, the Journal added.
As CUToday.info has reported, those credit unions that are offering crypto-brokerage services to members have been emphasizing that the investments are not NCUSIF insured.
$1.1B in Crypto Deposits
According to the Journal, Metropolitan Commercial Bank is one of a small group of banks willing to work with crypto firms. It held about $1.1 billion in deposits tied to crypto, 19% of its total, according to disclosures. It doesn’t hold any crypto assets and doesn’t make loans backed by crypto, the Journal reported, adding that Metropolitan holds the deposits as cash and doesn’t use them for other investments or loans, according to Keefe, Bruyette & Woods analyst Christopher O’Connell.
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