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Bankrupt crypto company Voyager has been permanently banned from handling consumers’ assets, following a settlement with the Federal Trade Commission (FTC) on Thursday. But the government agency also announced Thursday that it is suing former Voyager CEO Stephen Ehrlich for falsely claiming that users’ accounts were FDIC insured.
When a bank or financial service is FDIC insured, it means that customers’ money will be safe even if the bank fails. While Voyager promised customers this important protection, these claims were not true, as the FDIC does not insure crypto assets at all.
“When the company failed, consumers lost access to significant assets they had saved, including current salary deposits, college tuition funds, and down payments for homes,” the FTC explained in a statement. Voyager customers were unable to access their cash accounts for more than a month, and more than $1 billion in crypto assets were lost.
Voyager filed for bankruptcy in July 2022, citing volatile crypto prices and the bankruptcy of Three Arrows Capital (3AC), a crypto hedge fund that Voyager owed $650 million.
As part of the settlement, the FTC is fining Voyager $1.65 billion, but the fine is suspended so the defunct company can use that money to pay customers. In a parallel filing, the CFTC is also accusing Ehrlich of fraud and registration failures.
Government agencies are increasingly litigating when it comes to crypto companies, especially in light of high-profile failures like the FTX collapse – currently, former FTX CEO Sam Bankman-Fried is being sued for fraud. Just last month, the SEC accused Mila Kunis and Ashton Kutcher’s “Stoner Cats” NFT series of promoting unregistered securities.
