Federal Deposit Insurance Corporation (FDIC) has slapped Sam Bankman-Fried-owned cryptocurrency exchange FTX with a cease-and-desist order over “false and misleading statements” that suggest its assets are FDIC-insured. The The FDIC does not cover stocks or crypto, and protect only the funds in the insurance bank account.
In letter to exchange, the FDIC points to a now-deleted tweet from FTX president Brett Harrison, which says “direct deposits from employers to FTX US are held in FDIC-insured bank accounts in the names of users.” The tweet in question also states that “stocks are FDIC-insured and SIPC [Security Investor Protection Corporation]- insurance accounts. The FDIC claims that this misrepresents that FTX is an FDIC-insured user account when that is not the case.
Although not listed in the FDIC’s newsletter, users have also indicated otherwise a potentially misleading tweet from Harrison who says “funds linked to brokerage accounts are managed in an FDIC insured account” to FTX’s “affiliated bank”.
We did not mean to mislead anyone, and we did not suggest that only FTX US, or crypto/non-fiat assets, would benefit from FDIC insurance. I hope this provides some insight into our goals. Happy to work directly with the FDIC on these important topics.
— Brett Harrison (@Brett_FTX) August 19, 2022
Harrison has been there ever since provided a response to the FDIC’s letter, explaining that FTX “actually did not mean to mislead anyone,” and says that FTX “did not say that only FTX US, or that crypto/non-fiat assets, benefit from FDIC insurance.” FTX CEO is the founder of Bankman-Fried he gave details and, stating that although “FTX is not FDIC insured,” the banks it does business with do. Bankman-Fried adds that it “may explore possible ways that individual accounts using real money … in the future, can be used to protect customers,” and that FTX “would be happy to work with the FDIC on this.”
According to the FDIC, the Federal Deposit Insurance Act (FDI Act) prohibits companies from “implying that their assets are FDIC-insured by using ‘FDIC’ in the company’s name, advertisements, or other documents.” The FDIC is giving FTX 15 days to prove it has removed or corrected any errors. In addition to FTX, the FDIC issued cease-and-desist warnings to four other companies, including Cryptonews.com, Cryptosec.info, SmartAsset.com, and FDICCrypto.com.
The FDIC declined to comment beyond the contents of its letter, and FTX did not immediately respond Seasiderequest for comments.
Like Robinhood, FTX has begun offering both traditional and crypto trading strategies. In May, crypto billionaire Bankman-Fried revealed a 7.6 percent stake in Robinhoodand says he wants to buy a trading platform.
While the so-called crypto winter is driving several crypto companies into bankruptcy, FTX and Bankman-Fried’s crypto trade firm Alameda Research may continue to thrive. Bankman-Fried has extended loans to many struggling companies to help them weather the financial crisis, as well he said Reuters they have “a few billion” more about the bailout in the future. According to documents obtained by CNBCFTX brought in $1.02 billion in revenue in 2021 and $270 million in the first quarter of 2022.