Would be a Hoot If Regulators Cracked Down on Companies BEFORE They Freeze Customer Deposits & Cryptos and File for Bankruptcy
by Wolf Richter, Wolf Street:
Bankrupt Voyager gets slapped with a cease-and-desist order from the Fed and the FDIC after it’s way too late.
This evening, the Federal Reserve Board and the FDIC, as banking regulators, sent out a joint press release, advising the world that they sent a joint letter to Voyager Digital today, in which they demand that Voyager “cease and desist from making false and misleading statements regarding its FDIC deposit insurance status.”
TRUTH LIVES on at https://sgtreport.tv/
Voyager Digital is or was a crypto platform, crypto lender, and crypto broker that lured customers into depositing their crypto and fiat there, and then on July 1 suspended all withdrawals and trading, and then on July 6 filed for bankruptcy, and whoever had any money, fiat, or crypto, or whatever on the platform, is now an unsecured creditor in a bankruptcy case, and they have no idea if they will ever get any of their money, fiat, or crypto back.
Voyager is part of the now collapsing Decentralized Finance (DeFi) creature that was supposed to supersede FDIC-member banks.
The Federal Reserve and the FDIC today said that these false and misleading representations about FDIC insurance by Voyager “likely misled and were relied upon by customers who placed their funds with Voyager.”
“Voyager and certain officers and employees” made representations on its website, mobile app, and social media, “stating or suggesting that”:
- Voyager itself is FDIC-insured;
- Customers who deposited their money or crypto or whatever at Voyager would receive FDIC insurance coverage for all their funds.
- The FDIC would insure customers against the failure of Voyager itself.
The folks that believed those representations of FDIC insurance and were induced by them to send their cryptos and fiat or whatever to Voyager were the same folks who believed and were induced by Voyager’s promise that it would pay interest rates of up to 12% on its yield products. The whole DeFi segment relied on believe. You had to believe in it.
The regulators pointed out:
“Voyager maintains a deposit account for the benefit of its customers at Metropolitan Commercial Bank, which is supervised by the Board.
“Voyager is not itself insured by the FDIC, though, and so customers who invested through its cryptocurrency platform would not receive insurance coverage in the event of Voyager’s failure.”
OK, no FDIC insurance at Voyager, regardless of what Voyager might have said about that. We get that.
And now the big iron-fisted brutal regulatory crackdown, after – I mean like weeks after – everyone got cleaned out and it’s way too late for anything:
“We hereby demand that Voyager cease and desist, and take immediate corrective action to address these false and misleading statements,” the regulators said.
Step one: “Voyager shall immediately remove” any of the offending statements, representations, or references from “Voyager’s websites (including any pop-up, hyperlink, or chat-bot disclosures), Twitter and other social media accounts (including corporate and Voyager senior management’s personal accounts), mobile app, online outlets, and all forms (electronic and hard copy) of marketing, advertising, or consumer-facing materials and communications.”
And step two: “Within two (2) business days from the receipt of this letter, Voyager shall provide written confirmation to the FDIC and Board of Governors that it has fully complied with the requests set forth above.”
And that’s it.
The thing is that regulators don’t step in when the creature is booming and when folks are eagerly depositing their money or cryptos there, thinking they’ll make a risk-free 12% a year, or whatever, plus quadruple their money on their cryptos over the same period, while imagining that the federal government via the FDIC will insure their fiat and cryptos on deposit at the platform.
No, these regulators wait until after the creature collapsed, and then in due time, when the customers are already on the hook and cannot get their funds out, they’ll crack down with a cease-and-desist order, when in fact the company has already ceased to operate, and it’s a bankruptcy judge that decides what, if anything, the company is going to do next.
