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 prospects that their deposits had been held safely, and supplied incentives for changing crypto to USDC. Nevertheless, Voyager’s prospects 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 providers. Voyager pays a settlement of $1.65 billion after it pays collectors which can be owed compensation in its chapter case.
The FTC moreover filed expenses in opposition to former Voyager’s co-founder and former CEO, Steven Ehrlich, whereas additionally naming his spouse Francine Ehrlich as a aid defendant. Elhrich has not agreed to settle; the matter will proceed in court docket.
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 related the allegations to Voyager’s earlier collapse and chapter in mid-2022, stating:
“Ehrlich and Voyager lied to Voyager prospects … they took shockingly reckless dangers with their prospects’ property, resulting in Voyager’s chapter and large buyer losses. When their enterprise started to break down, they continued mendacity to their prospects, concealing Voyager’s true monetary well being.”
In its account of occasions, the CFTC mentioned that Ehrlich and his firm falsely marketed Voyager as a “protected haven” for crypto deposits and marketed returns as excessive as 12% on some property. However in actuality, it mentioned, Ehrlich and Voyager loaned billions of {dollars} of buyer deposits to third-party corporations to generate income for patrons.
Voyager’s resolution to interact 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 members.
The CFTC famous {that a} third celebration — referred to solely as “Agency A” within the assertion — defaulted on a mortgage when Voyager tried to get well it. That consequence 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 gifted administration crew at Voyager created and maintained our platform in full compliance with the prevailing regulatory construction. Our crew constantly communicated and labored intently with our regulators. I’m profoundly upset by the losses suffered by Voyager’s prospects and collectors as a result of conduct of others within the crypto trade. 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 stay up for vindication in court docket.”
The regulator mentioned 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.
