The U.S. Federal Commerce Fee (FTC) introduced on Oct. 12 that it has reached a settlement with the failed crypto lending firm Voyager Digital.
The FTC complained that Voyager falsely marketed U.S. greenback holdings as FDIC-insured, promised clients that their deposits have been held safely, and supplied incentives for changing crypto to USDC. Nevertheless, Voyager’s clients collectively misplaced entry to $1 billion of cryptocurrency when the corporate filed for chapter in 2022.
The settlement will see Voyager and its associates banned from providing and promoting a variety of shopper monetary companies. Voyager pays a settlement of $1.65 billion after it pays collectors which might be owed compensation in its chapter case.
The FTC moreover filed fees towards former Voyager’s co-founder and former CEO, Steven Ehrlich, whereas additionally naming his spouse Francine Ehrlich as a reduction defendant. Elhrich has not agreed to settle; the matter will proceed in courtroom.
CEO charged individually by CFTC
The CFTC individually charged Ehrlich with fraud, registration failures, and operation of an unregistered commodities pool on Oct. 12.
CFTC Director of Enforcement Ian McGinley linked the allegations to Voyager’s earlier collapse and chapter in mid-2022, stating:
“Ehrlich and Voyager lied to Voyager clients … they took shockingly reckless dangers with their clients’ belongings, resulting in Voyager’s chapter and large buyer losses. When their enterprise started to break down, they continued mendacity to their clients, concealing Voyager’s true monetary well being.”
In its account of occasions, the CFTC stated that Ehrlich and his firm falsely marketed Voyager as a “secure haven” for crypto deposits and marketed returns as excessive as 12% on some belongings. However in actuality, it stated, Ehrlich and Voyager loaned billions of {dollars} of buyer deposits to third-party corporations to generate income for patrons.
Voyager’s determination to have interaction in these loans signifies that the corporate acted as a commodity pool operator with out CFTC registration. The CFTC added that Ehrlich didn’t register as an related particular person of this pool regardless of soliciting individuals.
The CFTC famous {that a} third occasion — referred to solely as “Agency A” within the assertion — defaulted on a mortgage when Voyager tried to recuperate it. That final result led Voyager to file for chapter in July 2022.
Ehrlich has denied the allegations:
“The federal government’s filed claims depart me each outraged and deeply dismayed. The proficient administration staff at Voyager created and maintained our platform in full compliance with the prevailing regulatory construction. Our staff constantly communicated and labored carefully with our regulators. I’m profoundly upset by the losses suffered by Voyager’s clients and collectors as a result of conduct of others within the crypto business. I’m presently reviewing the federal government’s claims, however it’s clear I’m getting used as a scapegoat for the unhealthy actions of others. I look ahead to vindication in courtroom.”
The regulator stated that it seeks to have a number of fines imposed on Ehrlich, together with restitution, disgorgement, and civil financial penalties. It additionally goals to limit his actions by imposing everlasting buying and selling and registration bans, plus everlasting injunctions that may forestall Ehrlich from violating sure commodities rules.
