Bankrupt cryptocurrency company Voyager has been permanently banned from handling consumer assets following a settlement with the Federal Trade Commission (FTC) on Thursday. But the government agency also announced Thursday that it would indict former Voyager CEO Stephen Ehrlich for falsely claiming that users’ accounts were insured by the FDIC.
When a bank or financial services institution obtains FDIC insurance, it means that even if the bank fails, customers' funds will be protected. While Voyager promised customers this important protection, these claims were untrue as the FDIC did not insure crypto assets at all.
The FTC explained in a statement: "When companies fail, consumers lose important assets they have saved, including ongoing salary savings, college tuition funds and home down payments. Voyager customers were unable to access their cash accounts for more than a month and suffered more than $1 billion in crypto asset losses."
Voyager filed for bankruptcy in July 2022, citing cryptocurrency price volatility and the bankruptcy of crypto hedge fund Three Arrows Capital (3AC), which owed Voyager $650 million.
As part of the settlement, the FTC fined Voyager $1.65 billion, but the fine was suspended so the defunct company could use the money to repay customers. In a concurrent filing, the CFTC also charged Ehrlich with fraud and failure to register.
Government agencies are increasingly filing lawsuits when it comes to cryptocurrency companies, especially in light of high-profile failures like the collapse of FTX — which currently has former FTX CEO Sam Bankman-Fried on trial for fraud. Just last month, the SEC charged Mila Kunis and Ashton Kutcher with their “StonerCats” NFT series for promoting unregistered securities.