The FDIC and Federal Reserve (FED) jointly issued a cease and desist order urging cryptocurrency lender Voyager Digital to remove false claims that the deposit accounts of its customers are insured by the FDIC.
The agencies demand Voyager to immediately remove all false statements about deposit insurance, including the claim that all funds provided to and held by Voyager, including cryptocurrency, are FDIC-insured.
The material misrepresentations have been discovered on the company’s website, mobile application, and social channels.
The FEDs Are Getting Busy
The troubled lender displayed a marketing travesty by exploiting regulatory shortfalls. As stated in its December 2019 blog post, under the FDIC insurance, the FDIC would grant a full reimbursement to cover your losses in case your bank goes bankrupt.
Voyager updated the original post in July 2022, the statement says in the “rare event your USD funds are compromised, you are guaranteed a full reimbursement (up to $250,000).”
To make it clear, the company refers that Metropolitan Commercial Bank is now holding customers’ Voyager cash and the FDIC insurance will cover losses in the event that MCB fails.
“These representations are false and misleading, ” the agencies said in the statement, “Based on the information gathered to date, it appears that these representations likely misled and were relied upon by customers who placed their funds with Voyager and do not have immediate access to their funds.”
Following the bankruptcy filing, Voyager remained a point of conflict after the company’s lawyers rejected FTX’s acquisition offer, citing it as a lowball buyout bid.
The company is now facing another major problem as the FDIC steps in to clear out its misleading insurance claims.
Following the catastrophic event of Terra, Voyager Digital filed for Chapter 11 bankruptcy earlier this month (LUNA). Customer deposits have been frozen. The destructive trio – Voyager Digital, Three Arrow Capital, and Celsius – continues to make headlines in industry publications.
Babel Finance is the latest company to find itself in a vulnerable financial position in the midst of a domino effect that demonstrates no signs of abating.
The company is said to have lost approximately 8,000 Bitcoins and 56,000 Ether, which together are worth approximately $280 million. The losses are the user’s funds deposited into the platform. The platform announced withdrawal suspension in June and has since not issued any reopening.
Babel was alleged to use customer funds to engage in cryptocurrency trading in 2020. It was reported that Tether had increased the time before a margin call to one month in order to save the company. But unfortunately, things are different this time.
While the financial crisis could be a big obstacle to mass crypto adoption, it has helped expose the shortcomings of cryptocurrency-related entities. The collapse of big crypto lending players, whose destructive effects came into the limelight over the last two months, is going to last many years.
No More Fake Apps
In a different scenario, Apple Inc. (AAPL) and Google parent Alphabet Inc. (GOOGL) are under regulatory scrutiny for their failure to protect users from fake crypto investing apps.
The reason for this is that Apple and Alphabet failed to detect and remove fake apps from their stores.
According to Chairman of the Senate Banking Committee, Sherrod Brown, the spectacular bursting of the cryptocurrency market raises a wake-up call connected to enormous risks among crypto lending companies.
The senator wrote a letter to both Apple and Google, requesting that they explain the steps they take to detect and remove malicious cryptographic application software. The senator also inquired about the dependability and safety of those applications.
On July 18, the Federal Bureau of Investigation issued a warning about applications purporting to be for cryptocurrencies that were fraudulent.
The Chairman of the Securities and Exchange Commission (SEC) published a video on Thursday in which he reiterated his stance on cryptocurrencies and demanded that cryptocurrency exchanges register with the agency.
It looks like regulations tightening and framework establishment are in the works to minimize crypto risks and scams.