A couple of weeks ago, we reported that the FDIC and Federal Reserve Board sent a cease and desist (“C&D”) letter to Voyager Capital to stop representing that customer funds were protected by deposit insurance. In the past week, the FDIC sent five more letters to cryptocurrency-related companies on the same issue.
Demonstrating its now robust enforcement authority to correct advertising by “any person” who falsely or knowingly, or who aids or abets another to falsely or knowingly, misrepresent when deposit insurance is available to customers, the five C&Ds sent to companies not otherwise supervised or regulated by the FDIC and to individuals who made statements regarding the availability of crypto deposit insurance, one by simply owning a related domain name. (See our report regarding the June 2, 2022 FDIC rulemaking updates here.) The takeaway from this round of C&D is that the FDIC is hypersensitive to any pronouncements involving deposit insurance and cryptocurrency and is willing to take the most technical positions to get forward this message. Generally viewed as a rather mysterious issue, deposit insurance is nevertheless one of the foundations of monetary security for the average person in the United States, and it makes sense that the FDIC seeks so vigorously to protect this foundation.
Three of the companies that receive one of these C&Ds only provide news and information about the cryptocurrency industry:
A cryptocurrency exchange, FTX US, received a C&D due to tweets made by the exchange’s president, Brett Harrison, which referred to
Smart Asset newsletter article and stated that “direct deposits from employers to FTX US are held in individual FDIC-insured bank accounts in users’ names.” On the latter point, the FDIC found the Tweet’s failure to identify the insured bank(s) in which those funds were placed was a material omission under the deposit advertising rules. Finally, the FDIC sent a C&D to an individual, Corey Harris, who had registered a website domain called www.fdiccrypto.com. In that case, the FDIC argued that simply by having that website domain, the individual was involved in making false and misleading statements about the availability of deposit insurance for cryptocurrency products.
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