Bankrupt Crypto Brokerage Voyager Ordered to Cease False Promises About U.S. Banking Insurance

WASHINGTON—U.S. regulators issued a joint letter ordering bankrupt cryptocurrency broker and lender Voyager Digital Ltd. to cease and desist from marketing itself as insured by the Federal Deposit Insurance Corp., saying statements on its website and elsewhere were false and misleading.

The joint letter released Thursday, from the Federal Reserve and FDIC, said the company’s statements “likely misled and were relied upon by customers who placed their funds with Voyager and do not have immediate access to their funds.”

Voyager sought Chapter 11 bankruptcy protection earlier this month.

A spokesman didn’t immediately respond to a request for comment on Thursday’s letter.

Voyager had marketed its accounts as protected by that national safety net, an attractive pitch in the volatile world of cryptocurrency.

“In the rare event your USD funds are compromised due to the company or our banking partner’s failure, you are guaranteed a full reimbursement (up to $250,000),” Voyager wrote in 2019.

Thursday its website said “Your USD is held by our banking partner,

Metropolitan Commercial Bank,

which is FDIC insured, so the cash you hold with Voyager is protected.” Metropolitan Commercial is a small New York bank overseen by the Fed.

Individual customer accounts are eligible for insurance, but only in the case of a failure of the bank, not Voyager, Metropolitan Commercial said earlier this month. That is typical since the FDIC only backstops participating banks.

The confusion drew the attention of the FDIC, which began looking into Voyager’s marketing earlier this month, The Wall Street Journal previously reported.

Voyager’s website also says: “Cryptocurrency held on the Voyager Platform is not protected by FDIC insurance or any other government-backed or third party insurance.”

A Voyager spokesman said earlier this month that the company’s disclosure statement wasn’t new.

Voyager’s bankruptcy came after the company was caught in a spiral of plunging crypto prices that collapsed hedge funds and companies, and pushed down the value of its assets.

The company froze all activity, including withdrawals on $350 million in customer deposits that are stored at Metropolitan Commercial. Voyager said customers would be able to access those dollars after “a reconciliation and fraud prevention process is completed.”

Write to Andrew Ackerman at andrew.ackerman@wsj.com

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Appeared in the July 29, 2022, print edition as ‘Voyager Ordered to Stop False Promises.’

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