Voyager ordered by Fed to remove false FDIC insurance claims

Voyager Digital is a crypto lender that most investors will never forget. US banking authorities have ordered crypto firm Voyager Digital to cease and desist from making “false and misleading” claims. According to regulators in the United States, these claims state that the government safeguarded its clients’ money.

This has shaken the crypto industry to its core. Investors are furious over how Voyager has treated them. On Thursday, the Federal Reserve and the Federal Deposit Insurance Corp (FDIC) wrote to the firm demanding an explanation. The entities said that Voyager misled customers by claiming their funds with the company would be covered by the FDIC.

Voyager Digital caught in an FDIC insurance lie

The regulators said that, while the firm was in bankruptcy, its executives and representatives made a variety of claims indicating that Voyager itself was FDIC-insured. This means that customers who invested in the company’s cryptocurrency platform would have their funds insured. Additionally, if the crypto firm failed, FDIC would insure customers against that failure.

In a joint statement, Seth Rosebrock and Jason Gonzalez, the warning’s authors, claimed that the representations most likely misled and were used by customers who placed money with the entity to tarnish its reputation substantially.

In reality, the regulators claimed that the firm merely maintained a deposit account at Metropolitan Commercial Bank, and investors using the company’s platform lacked FDIC protection. The Fed and FDIC claim that Voyager “made numerous representations online, including its website, mobile app, and social network accounts” in order to deceive consumers into investing with them.

Voyager has made various representations online, including its website, mobile app, and social media accounts, stating or suggesting that: (1) Voyager itself is FDIC-insured; (2) customers who invested with the Voyager cryptocurrency platform would receive FDIC insurance coverage for all funds provided to, held by, on, or with Voyager; and (3) the FDIC would insure customers against the failure of Voyager itself. These representations are false and misleading and, based on the information we have to date, it appears that the representations likely misled and were relied upon by customers who placed their funds with Voyager and do not have immediate access to their funds.

Fed and FDIC joint statement

The regulators ordered the firm to delete any deceptive claims within two business days of receiving the letter in a communication sent to corporate bosses. It also stated that, even if Voyager met the demands set out in the cease-and-desist letter, it would not prevent the regulator from taking additional measures if deemed necessary.

Voyager’s demise adds pain to the embattled crypto industry

Voyager was one of a number of crypto-related firms that fell victim to the broader cryptocurrency market slump. In its Chapter 11 bankruptcy filing last month, the entity claimed it had more than 100,000 claimants with assets between $1 billion and $10 billion and debts worth the same amount.

The firm has reportedly rejected an offer from FTX and Alameda Research, which was deemed to be at or below a reasonable price. The exchange users will have access to liquidity through a proposal submitted by FTX.

The Voyager website says that it is working with the FDIC to update and clarify the language about FDIC insurance on its website in early 2021 and early 2022. The firm`s bankruptcy raises novel issues about what happens to digital assets when a company goes bankrupt.

Because Voyager is the first cryptocurrency firm to seek Chapter 11 bankruptcy, new legislation will quickly emerge in the bankruptcy case that will have a lasting influence on the cryptocurrency sector, and winners and losers will be determined by how parties act now during these uncertain times.

The demise of the Terra UST and LUNA has had far-reaching ramifications on the crypto market. This calamity prompted the collapse of significant bitcoin exchanges as well as lending firms like Coinbase, 3AC, and Celsius.

The new financial industry has been thrown into disarray by global macroeconomic, political, and geopolitical conflict. All in all, cryptocurrencies have shown a good trend in recent months. As July progresses, bitcoin’s price is rising against increasing resistance levels that may top 20%.