FDIC hits bankrupt lender Voyager over deposit insurance claims

  • The US Securities and Exchange Commission issued a cease and desist letter to Voyager Digital
  • Voyager, a cryptocurrency lender, filed for Chapter 11 bankruptcy earlier this month

It’s been 20 days since an investigation into crypto lender Voyager Digital’s marketing of its consumer deposit accounts was launched. Now US regulators have hit the bankrupt firm with a cease and desist order.

In a statement Thursday, the Federal Deposit Insurance Corporation (FDIC) and the Federal Reserve Board said they issued a joint letter to Voyager demanding that it cease making false and misleading statements related to its FDIC deposit insurance status.

Voyager and some employees are accused by the agencies of making false statements online, including its website, mobile app and social media accounts.

Those statements, the watchdog said, include claims that Voyager is insured by the FDIC and that all user funds provided and held by the lender, including crypto, are insured. Under the Federal Deposit Insurance Act, companies and individuals are prohibited from selling uninsured deposit accounts as insured.

“These statements are false and misleading,” the agencies said in a statement. “Based on the information gathered to date, it appears that these statements were likely misled and relied upon by customers who placed their funds with Voyager and did not have immediate access to their funds.”

Voyager, which is fending off what it says is a “lowball” buyout offer from Sam Bankman-Fried’s companies FTX and Alameda Ventures, became the focus of an investigation on July 8 by the FDIC because it publicly said its dollar deposits were insured in case the lender goes bankrupt.

Voyager maintains a deposit account for the benefit of its customers through its banking partner Metropolitan Commercial Bank.

The lender itself is not insured by the FDIC, the agencies said, so customers who invested through Voyager’s cryptocurrency platform would not receive insurance coverage in the event of failure.

Earlier this month, the lender filed for Chapter 11 bankruptcy following revelations that it was caught up in the widespread contagion of the bankruptcy of Singapore-based hedge fund firm Three Arrows Capital.

A 2019 statement on Voyager’s website claimed that customers could receive a full refund after an event where US dollar funds were compromised due to the bankruptcy of the lender or its banking partner.

This has since been changed to state that in the “rare cases” customers’ funds are compromised, they should be guaranteed a full refund of up to $250,000.

The watchdog is demanding Voyager take “immediate corrective action” to address “false claims” related to its status.

Meanwhile, the Toronto Stock Exchange has suspended trading in Voyager shares and now faces a full delisting.

The company’s shares, which plunged 75% in July, were also moved from the US platform OTCQX International to the OTC Pink Sheets, which has much lower reporting and disclosure requirements.

Voyager’s native token VGX has fared better, up 30% in the past month, but is still trading 85% below its year-to-date price, currently valued at $0.40.


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  • Sebastian Sinclair

    Blocks

    Senior Reporter, Asia News Bureau

    Sebastian Sinclair is a senior news reporter for Blockworks operating in Southeast Asia. He has experience covering the crypto market as well as certain developments affecting the industry, including regulation, business and mergers and acquisitions. He currently does not own any cryptocurrencies. Contact Sebastian via email at [email protected]

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