FDIC Accuses FTX US of Making Misleading Statements

Harrison tweeted on July 20 that “direct deposits from employers to FTX US are stored in individually FDIC-insured bank accounts in the users’ names”
FTX is also falsely identified as an FDIC-insured crypto exchange on SmartAsset.com and CryptoSec.info, according to the agency

The Federal Deposit Insurance Corporation (FDIC) has warned five companies, including crypto exchange FTX US, to stop making false and misleading statements about FDIC deposit insurance, the agency revealed Friday.

In a letter sent to FTX US on Thursday, the FDIC wrote that the firm’s president, Brett Harrison, said in a July 20 tweet that “direct deposits from employers to FTX US are stored in individually FDIC-insured bank accounts in the users’ names.” The tweet also states that “stocks are held in FDIC-insured and SIPC-insured brokerage accounts.”

“FTX US is not FDIC-insured, the FDIC does not insure any brokerage accounts, and FDIC insurance does not cover stocks or cryptocurrency,” the FDIC said in the letter.

It continued: “The FDIC only insures deposits held in insured banks and savings associations…and FDIC insurance only protects against losses caused by the failure of insured institutions. Accordingly, these statements are likely to mislead, and potentially harm consumers.”

FTX is further identified as an FDIC-insured crypto exchange on SmartAsset.com and CryptoSec.info, according to the FDIC.

Harrison tweeted in response to the letter Friday, saying that he deleted the July 20 tweet, which he noted was written in response to questions regarding whether direct USD deposits from employers were held at insured banks.

“We really didn’t mean to mislead anyone, and we didn’t suggest that FTX US itself, or that crypto/non-fiat assets, benefit from FDIC insurance,” Harrison added. “I hope this provides clarity on our intentions. Happy to work directly with the FDIC on these important topics.”

In addition to sending cease-and-desist letters to FTX US, CryptoSec.info and SmartAsset.com, the FDIC also issued notices to Cryptonews.com and FDICCrypto.com for similar alleged violations.

This is a developing story.

Updated on Aug. 19, 2022 at 3:01 pm ET.

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Ben Strack
Ben Strack is a Denver-based reporter covering macro and crypto-native funds, financial advisors, structured products, and the integration of digital assets and decentralized finance (DeFi) into traditional finance. Prior to joining Blockworks, he covered the asset management industry for Fund Intelligence and was a reporter and editor for various local newspapers on Long Island. He graduated from the University of Maryland with a degree in journalism.
Contact Ben via email at [email protected]

Source: https://blockworks.co/fdic-accuses-ftx-us-of-making-misleading-statements/