In a recent report, the Federal Deposit Insurance Corporation (FDIC) warned FTX over alleged misleading information to the public.
According to the regulator, Sam Bankman-Fried’s company has made false representations, making customers believe that the firm’s crypto products are FDIC-insured. Meanwhile, the new development arose after the FDIC dived into the activities of crypto exchanges claiming to provide insured digital assets.
FTX Issues a Cease-And-Desist Order
The Sam Bankman-Fried managed crypto exchange is at the center of the recent warning from the regulator. Accordingly, the corporation handed a cease-and-desist notice to FTX. The crypto brokerage firm has been warned to stop revealing misleading information to customers about the insurance status of their assets.
According to the FDIC, the claim is misleading because crypto assets in the custody of brokerages or exchanges are not insured. In contrast to banks, where the government protects investors’ funds.
Furthermore, the corporation revealed in its press release that it has evidence to support its claim against FTX. However, the FDIC noted that FTX is not alone in disseminating false representations on its websites and social media platforms.
The accused crypto exchanges suggest that some crypto products are FDIC-insured, which is false. Going by the Federal Deposit Insurance Act (FDIC Act), any company misrepresenting the manner of deposit insurance has committed an offense.
In another development, the FDIC had previously issued the same warnings to Voyager Digital after the company claimed the corporation insured its funds. Only regulated bank accounts are insured by the FDIC, not crypto brokerage firms.
The insurance regulator is cracking down on misinformation from crypto firms. In their bid to woo customers, exchanges market their products as FDIC-insured.
FDIC Indicts Other Companies
As stated earlier, the corporation also listed several other firms as part of its investigation into false claims. Enterprises in the crypto industry like Cryptonews.com, FDICCrypto.com, SmartAsset.com, and Cryptosec.info are part of the indicted firms.
Thus, the FDIC disclosed that the companies mentioned in its statement must implement immediate corrective measures to address the issue. In addition, the regulator also added that intentionally dishing out information on products as FDIC insured is prohibited by the agency.
Commenting on the order, Brett Harrison, the president of FTX, revealed that he had previously tweeted about their company’s products being FDIC-insured. As a result, the FDIC used the same information to issue the cease-and-desist notice.
However, Harrison noted that he had deleted the Twitter post and did not intend to mean that the FDIC insured its crypto products.
Meanwhile, the FDIC has been accused of preventing banks from working with crypto exchanges. Senator Pat Toomey accused the corporation of stifling the growth and expansion of the crypto industry.
Toomey notes that the FDIC, through regulations, barred banks from facilitating crypto transactions. Furthermore, the senator accused the corporation in a letter to its chairman, Martin Grurnberg, of misbehaving.
The letter indicates that banks doing business with crypto firms is a; lawful endeavor and that the FDIC is guilty of deterring cryptocurrency adoption in the mainstream.