WASHINGTON–The Federal Trade Commission has entered into a settlement with bankrupt crypto company Voyager that will permanently ban it from handling consumers’ assets.
In addition, the FTC said it is filing suit against its former CEO, Stephen Ehrlich, for falsely claiming that customers’ accounts were insured by the Federal Deposit Insurance Corporation (FDIC) and were “safe,” even as the company was approaching an eventual bankruptcy.
The complaint also names Stephen Ehrlich’s wife, Francine Ehrlich, as a relief defendant.
Not ‘Safe’
In the federal court complaint, the FTC charges that from at least 2018 until it declared bankruptcy in July 2022, Voyager used promises that consumers’ deposits would be “safe” to entice them to hand over their funds.
“When the company failed, consumers lost access to significant assets they had saved, including ongoing salary deposits, college tuition funds, and down payments for homes, according to the complaint, which notes that consumers were locked out of their cash accounts for more than a month and lost more than $1 billion in crypto assets,” the FTC said.
The proposed settlement with Voyager and its affiliates will permanently ban the companies from offering, marketing, or promoting any product or service that could be used to deposit, exchange, invest, or withdraw any assets, according to the FTC.
In addition, the government said the companies also agreed to a judgment of $1.65 billion, which will be suspended to permit Voyager to return its remaining assets to consumers in the bankruptcy proceedings.
Ex-Exec Has Not Agreed
Former executive Stephen Ehrlich has not agreed to a settlement and the FTC’s case against him will proceed in federal court.
According to the complaint, Voyager enticed consumers to deposit cash and cryptocurrency with the company based on assurances that their assets were especially safe on the platform.
“The company offered incentives to consumers who converted the cash they deposited into a cryptocurrency called USD Coin, a so-called ‘stablecoin’ that claims to track the value of the U.S. dollar,” the FTC said. “The company’s marketing included direct promises about the safety of consumers’ deposits. One example cited in the complaint included the line “YOUR USD IS FDIC INSURED.”
That claim was false.
Where Funds Actually Were
The FTC said customers’ cash deposits were actually placed in an account held by Voyager at a traditional bank that also issued debit cards on behalf of Voyager.
The complaint notes that Voyager was aware that the company’s claims could mislead consumers.
“The bank where Voyager deposited consumers’ funds contacted the company in 2021 saying the claims were ‘potentially misleading’, the FTC said. “A bank representative went on to say that ‘a reasonable consumer could conclude that his USDC [USD Coin] held with Voyager is FDIC-insured.’ While Voyager made some changes to its cardholder agreement, the complaint notes that the company continued its misleading advertisements.”
Cease-and-Desist
The company only removed the FDIC claims from its advertising after receiving a cease-and-desist letter from the FDIC, the FTC said.
In addition, the FTC said Ehrlich himself, in a June 2022 letter to Voyager customers, reassured them of the company’s stability, claimed it was “well-capitalized and positioned to weather the bear market,” and said that consumers’ funds were “as safe with us as at a bank.”
Two weeks later, the company froze consumers’ access to their accounts.
Just Because It’s Autumn Doesn’t Mean Falling for Schemes to Overcharge You for CU Industry News. Instead, Try This Crisp Offer
The biggest, best and freshest news reporting in credit unions remains free! Each morning CUToday.info delivers its daily Fresh Today news update offering the latest headlines and breaking news right to your email, with the easy-to-read headlines format allowing you to click on the stories that interest you most in order to learn more. So stop paying those bank-fee-like subscription prices from other so-called “news”” publications!
If you haven’t yet signed up for the new email solution on which CUToday.info has partnered with ResponseGenius, you can do so here. Signing up requires less than one minute of your time—and it’s free!
Please note that after signing up you may need to go to your Spam/Junk folder and mark the morning headlines email as safe. CUToday.info does not provide its list of readers and emails to outside parties, and we will not be contacting you to sell you an extended warranty or sending you any links so you may cash in on an inheritance you didn’t know was coming.
And did we mention it’s free?