FDIC sends 5 companies, including FTX.US, cease and desist letters for making false statements about deposit insurance

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The Fed­er­al Deposit Insur­ance Corp. (FDIC) said Aug. 19 that it issued let­ters demand­ing Cryptonews.com, Cryptoytosec.info, SmartAsset.com, FTX.US and FDICCrypto.com to stop mak­ing mis­lead­ing state­ments about FDIC deposit insur­ance and imple­ment cor­rec­tive measures. 

FDIC deposit insur­ance pro­tects cus­tomers in the unlike­ly event of the fail­ure of an FDIC-insured bank. 

In the cease and desist let­ters sent Aug. 18, the FDIC demand­ed that the com­pa­nies, their offi­cers and employ­ees abstain from allud­ing to any pres­ence of FDIC deposit insur­ance at cer­tain exchanges or their own plat­forms. It also demand­ed that the com­pa­nies take imme­di­ate mea­sures to cor­rect any false and mis­lead­ing state­ments made previously. 

The FDIC alleges in the text of the let­ters that each enti­ty has pur­port­ed­ly mis­rep­re­sent­ed the depos­i­to­ry insur­ance sta­tus of hold­ings or fur­thered false­hoods con­cern­ing deposit insur­ance coverage. 

Based on the evi­dence pre­sent­ed by the FDIC in the let­ter, each of the com­pa­nies alleged­ly 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. 

Accord­ing to the FDIC’s let­ter to FTX.US, Pres­i­dent Brett Har­ri­son tweet­ed on July 20 that “direct deposits from employ­ers to FTX US are stored in indi­vid­u­al­ly FDIC-insured bank accounts in the users’ names,” and “stocks are held in FDIC-insured and SIPC-insured bro­ker­age accounts.”

The reg­u­la­tor claims these state­ments con­tain false and mis­lead­ing rep­re­sen­ta­tions of the company’s unin­sured prod­ucts. It added:

“In fact, FTX US is not FDIC-insured, the FDIC does not insure any bro­ker­age accounts, and FDIC insur­ance does not cov­er stocks or cryptocurrency. “

The reg­u­la­tor, in its let­ter to Cryptonews.com, list­ed five instances, out of many cit­ed, where the web­site had alleged­ly either mis­rep­re­sent­ed or mis­char­ac­ter­ized the FDIC-insured claims in their reviews of cryp­to exchanges.

The FDIC sin­gled out Cryptosec.info for alleged­ly includ­ing a list of “FDIC-insured Cryp­to Exchanges” on its web­site along with the use of the FDIC’s offi­cial seal. SmartAsset.com also con­tributed to a list of sup­posed FDIC-insured cryp­to exchanges that the FDIC has asked be removed.

The reg­u­la­tor alleges that FDICCrypto.com used the agency’s name in its reg­is­tered domain name. This, accord­ing to the FDIC, sug­gests affil­i­a­tion with or endorse­ment by the FDIC, and it has demand­ed the com­pa­ny cease the use of the domain name or sim­i­lar domain names immediately.

The FDIC demand­ed that all com­pa­nies remove the offend­ing exam­ples from their respec­tive spaces and called for each enti­ty to con­duct a scrub­bing of any addi­tion­al mis­lead­ing state­ments and report back in 15 days with compliance.

Post­ed In: Legal, Reg­u­la­tion

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