FDIC Cracks Down on Crypto News Sites over Spreading Misleading Statements on FDIC Deposit Insurance
Posted on 08/19/2022
The Federal Deposit Insurance Corporation (FDIC) published five cease-and-desist orders. FDIC issued letters demanding five companies and their officers, directors, and employees cease and desist from making false and misleading statements about FDIC deposit insurance and take immediate corrective action to address these false or misleading statements. FTX.US was one of the companies that received the cease-and-desist order. Retail investors have lost much money in some cryptocurrency exchanges such as Celsius, as well as in the digital currencies themselves over “fraud” such as LUNA.
Some cryptocurrency exchanges and lenders exploded in 2022 and one of them is Celsius Network, which got backing from institutional investors such as Westcap and Caisse de depot et placement du Quebec (CDPQ). CDPQ wrote off its US$ 150 million investment in Alex Mashinsky’s Celsius Network. Creditors of Celsius Network are owed US$ 4.7 billion from the cryptocurrency exchange. Law firm Kirkland & Ellis represents Celsius Network in its bankruptcy. For some retail investors, the money deposited into Celsius was their life savings and for others was used to fund a home deposit or retirement. Celsius froze withdrawals in June 2022 and these customers are trying to get their money out. To make matters worse is that these Celsius depositors are being classes as unsecured creditors.
The press release reads, “Based upon evidence collected by the FDIC, each of these companies made false representations—including on their websites and social media accounts—stating or suggesting that certain crypto–related products are FDIC–insured or that stocks held in brokerage accounts are FDIC–insured. In one case, a company offering a so–called cryptocurrency also registered a domain name that suggests affiliation with or endorsement by the FDIC. These representations are false and misleading.
The Federal Deposit Insurance Act (FDI Act) prohibits any person from representing or implying that an uninsured product is FDIC–insured or from knowingly misrepresenting the extent and manner of deposit insurance. The FDI Act further prohibits companies from implying that their products are FDIC–insured by using “FDIC” in the company’s name, advertisements, or other documents. The FDIC is authorized by the FDI Act to enforce this prohibition against any person.
FDIC deposit insurance protects customers in the unlikely event of the failure of an FDIC–insured bank. To determine if an institution is FDIC–insured, you can ask a representative of the institution, look for the FDIC sign at the institution, or use the FDIC’s BankFind tool. For general information about FDIC deposit insurance, read the following frequently asked questions. For more information about FDIC insurance and crypto companies, read the following fact sheet.”
Part of the letter from FDIC to FTX US’s legal team reads, “It appears that on July 20, 2022, Mr Harrison published a tweet on the Twitter account, “@Brett_FTX,” which stated, among other things, “direct deposits from employers to FTX US are stored in individually FDIC-insured bank accounts in the user’s names,” and “stocks are held in FDIC-insured and SIPC-insured brokerage accounts.” FTX is also identified as an “FDIC-insured” cryptocurrency exchange on the SmartAsset website, ” https://smartasset.com/investing/list-of-fdic-insured-cryptocurrency-exchanges, and the CryptoSec.Info website, https://crypto.info/fdic.
LINK: https://www.fdic.gov/news/press-releases/2022/pr22060.html
