Crypto exchange FTX ordered to stop ‘false and misleading’ claims by US banking regulator

Representations of cryptocurrencies in this illustration taken January 24, 2022. REUTERS/Dado Ruvic/Illustration/File Photo

WASHINGTON, Aug 19 (Reuters) – A U.S. banking regulator ordered crypto exchange FTX on Friday to stop what it called “false and misleading” claims the exchange had made about whether funds in the company are insured by the government.

The Federal Deposit Insurance Corporation said a tweet in July by Brett Harrison, head of FTX’s U.S. operations, contained misleading claims that funds held and stocks purchased through FTX were FDIC-insured, and ordered the company to remove any misleading language from its social media accounts and websites.

In the tweet, which Harrison has since deleted, he stated that direct deposits from employers to the crypto exchange are “held in individual FDIC-insured bank accounts” and that shares purchased through FTX US are “held in FDIC-insured” brokerage accounts. The FDIC said in its cease and desist letter to FTX US that those statements implied that FDIC insurance was available for cryptocurrency and stock holdings, and that the agency does not insure brokerage accounts.

In a tweet on Friday, FTX CEO Sam Bankman-Fried emphasized that FTX is not FDIC insured and apologized if anyone misinterpreted earlier comments.

The order, one of five sent to crypto firms by the FDIC on Friday, comes as regulators have stepped up efforts to police crypto firms that may mislead investors about whether their funds enjoy a government backstop. The issue has come to a head lately, as turmoil in the crypto market has led to the stress and collapse of some high-profile firms.

The banking regulator issued a similar cease-and-desist letter to bankrupt crypto firm Voyager Digital, claiming the company had misled customers by claiming their money at Voyager would be covered by the FDIC. Later, the FDIC issued an advisory urging banks that work with crypto companies to ensure that customers are aware of the types of assets that are government insured, especially in cases where firms offer a mix of uninsured crypto products alongside insured bank deposit products. read more

Reporting by Pete Schroeder and Hannah Lang Editing by Tomasz Janowski

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