WASHINGTON – The Federal Deposit Insurance Corp. issued five cease-and-desist letters on Friday telling five cryptocurrency-related companies to stop making false and misleading claims about the availability of deposit insurance to their customers.
The FDIC announced on Friday afternoon that it had ordered five companies behind some crypto websites – including FTX US, Cryptonews.com, Cryptosec.info, SmartAsset.com and FDICCrypto.com – to “take immediate action to combat false or misleading information” about their customers’ money. it was insured by a federal agency.
Under the Federal Deposit Insurance Act, the FDIC has the authority to prohibit the use of an organization’s name or logo to imply that customer deposits are federally insured when they are not. Each letter — signed by FDIC assistant chief Seth Rosebrock — noted that the FDIC also has the authority to review federal financial penalties.
“Based on evidence obtained by the FDIC, both companies made false statements – including on their websites and social media accounts – stating or implying that certain crypto-related products are FDIC-insured or that stocks held in brokerage accounts are FDIC-insured,” the agency said. it said in a press release. “In other words, a company that provides cryptocurrency funds has also registered a domain name that indicates compliance with or approval by the FDIC.”
The lawsuit follows a similar lawsuit filed against Voyager, a cryptocurrency company that collapsed in July, after customers scrambled to understand what would happen to their dollars held by a bank affiliate after the crypto company promised those deposits were FDIC insured. The FDIC said the way the arrangement was communicated to customers was misleading.
The organization has done it again warned the banks to ensure that these arrangements are valid. That is the area where the FDIC is focusing on the growth of the crypto industry, and the turmoil in the crypto markets.
One of these companies, FTX US, is the US arm of one of the largest crypto exchanges in the world. In July, FTX US President Brett Harrison said on Twitter that tthe company now offers direct deposits from employers into “FDIC-insured bank accounts in the names of users.” FTX is also known as an “FDIC-insured” cryptocurrency exchange on the SmartAsset website, according to the FDIC’s letter.
“These false and misleading statements represent or imply that FTX US is FDIC-insured, that funds invested with FTX US are, and will always be, deposited in FDIC-insured banks, that brokerage accounts at FTX US are FDIC-insured. – insurance, and FDIC insurance is available for cryptocurrency or stocks,” the FDIC said in its letter to FTX US. “In fact, FTX US is not FDIC insured and the FDIC does not insure any mortgage accounts, and the FDIC does not insure stocks or cryptocurrency.”
The letter tells FTX US to immediately remove any statements that suggest otherwise.
When asked for comment, FTX US representatives directed American Banker to a tweet published by Harrison on Friday.
“We didn’t mean to mislead anyone, and we didn’t say that only FTX US, or that crypto/non-fiat assets, would benefit from FDIC insurance,” Harrison said. “I hope this explains our intentions.”
The agency took action against FDICCrypto.com, which redirects customers to a separate website that appears to be hosted by a company called CH’s Service Provider, which describes itself as a Pennsylvania-based travel service. The FDICCrypto.com directory directs viewers to chsserviceprovider.com/cryptocurrency, a site that as of press time promises “freedom of transactions” and “industry growth.”
“Using a domain name www.fdiccrypto.comyou are making false representations, plain and simple,” the FDIC letter said, adding: “These representations are false and misleading, and because of those representations, consumers visiting the site may be misled and possibly harmed.”
For SmartAsset.com, the FDIC dropped a recent article published by a crypto company on its website listing “FDIC-insured crypto exchanges,” which the agency said in its Friday letter “appears to contain false and misleading information” about the insurance of crypto exchanges. deposit.
“In fact, the FDIC does not insure any cryptocurrency exchange; FDIC insurance does not cover cryptocurrency; the FDIC only protects deposits held in sunred banks and savings institutions,” the letter said.
The FDIC issued a list of similar complaints to Cryptonews.com, which the agency complained about because it claimed that the crypto exchange Coinbase was “one of the few exchanges” “regulated and insured by the FDIC” – which the website said recklessly. partnered with crypto companies eToro, Gemini, and Crypto.com.
“These bullets are just a sample of FDIC Deposit Insurance related errors that can be found on Cryptonews,” the FDIC’s letter said, “and these bullets should not be taken as a list of such products.”
For Cryptosec.info, the FDIC identified a website that falsely listed “FDIC-insured Crypto Exchanges,” claiming that the website “displays an official FDIC seal.”
For each letter, the FDIC ordered the recipient to respond within 15 days acknowledging receipt of the agency’s letter. The FDIC also told the companies to provide “information and documentation supporting the basis of your reasonable belief” for their crypto-related deposit insurance claims, if requested.
“Failure to respond to this letter may result in the FDIC taking appropriate action under the Federal Deposit Insurance Act,” the letters said.