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Two US regulators filed lawsuits against Voyager Digital founder Stephen Ehrlich accusing him of misleading customers about their assets and taking ”excessive risks” that brought the firm down.
The US Commodity Futures Trading Commission (CFTC) accuses the trading firm and Ehrlich of fraud, registration failure, and operating an unregistered commodity pool.
The Federal Trade Commission (FTC) filed a parallel lawsuit against Ehrlich, accusing him of falsely claiming that Voyager accounts are insured by the Federal Deposit Insurance Corporation (FDIC).
It also accuses Ehrlich of allegedly transferring millions of dollars in funds belonging to Voyager
CFTC commissioner Kristin Johnson said the bankrupt crypto firm promised a “safe haven” to its customers but instead approved risky loans at the expense of customer assets.
Statement of @CFTCjohnson regarding @cftc‘s charges against Voyager’s chief executive officer. Learn more: https://t.co/OiBvOoCuV6
— CFTC (@CFTC) October 12, 2023
“Voyager conducted bare-bones due diligence and then seemingly ignored the results of that process even when counterparties failed to return the minimal materials they requested,” Johnson said. “The company became no better than a house of cards.”
The CFTC’s director of enforcement, Ian McGinley, accused Voyager of misleading customers. The platform claimed it would treat customer assets safely but instead took reckless risks using these assets.
Voyager Digital Hid Information From Customers
Johnson said that Voyager hid information from its customers. In one case, a counterparty defaulted in repaying a Voyager loan of around $650 million but the firm’ failed to mention it to customers.
Ehrlich concealed Voyager’s poor financial position from customers. Instead, the broker continued soliciting more deposits from new and existing customers. The fresh deposits went towards meeting withdrawals.
Johnson said that Voyager did not demand transparency from the investment firms receiving customer assets. It also never sought audited financial statements from these companies.
FTC Reaches A Settlement With Voyager Digital
The FTC also reached a settlement deal with the bankrupt crypto firm. Under the proposed settlement, the FTC bars Voyager and its affiliates from handling customer assets. Voyager and its affiliates will also pay a $1.65 billion fee as part of the settlement.
FTC reaches settlement with crypto company Voyager Digital; Charges former executive with falsely claiming consumers’ deposits were insured by FDIC: https://t.co/Kgz368Hbrk /1
— FTC (@FTC) October 12, 2023
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