Voyager slapped with assets ban after $1B loss fiasco

The Federal Trade Commission (FTC) has reached a settlement with bankrupt cryptocurrency company Voyager after it lost $1 billion in assets. The deal effectively forbids it from handling assets ever again.

The FTC cracked down on Voyager and its embattled CEO, Stephen Ehrlich, after they falsely claimed that investor assets were insured at the federal level between 2018 and last year, when it filed for bankruptcy. This led to clients being locked out of accounts and unable to access “ongoing salary deposits, college tuition funds, and down payments for homes.”

Announcing the settlement on October 12th, the FTC added: “The proposed settlement with Voyager and its affiliates will permanently ban the companies from offering, marketing, or promoting any product or service that could be used to deposit, exchange, invest, or withdraw any assets.”

Voyager and its affiliate companies have also agreed to a suspended fine of $1.65 billion, which will allow it to first recoup lost assets and return them to their rightful owners.

Ehrlich, however, has not agreed to the deal and separate federal charges will proceed against him. On the same day as it announced the deal with Voyager, the FTC also declared that Ehrlich would be tried for fraud by the Commodity Futures Trading Commission.

How Voyager deceived its clients

“Voyager enticed consumers to deposit cash and cryptocurrency with the company based on assurances that their assets were especially safe on the platform,” said the FTC.

Voyager offered “incentives” to consumers who placed cash deposits into the stablecoin USDC, which is pegged to the US dollar, but lied about being insured by the Federal Deposit Insurance Corporation (FDIC).

“Voyager [...] is not a bank or financial institution, and the deposits consumers made [...] were not eligible to be insured by the FDIC,” said the FTC. “The complaint notes that the FDIC does not insure crypto assets at all, and consumers’ cash deposits were actually placed in an account held by Voyager at a traditional bank that also issued debit cards on behalf of Voyager.”

The FTC further noted that investors’ cash deposits were only protected if the bank itself failed, while their cryptocurrency “wasn’t protected at all.” The same day as it announced the settlement with Voyager, it also issued a stark warning to investors across the sector - any funds deposited with "a crypto-based financial services provider," by definition, cannot be FDIC insured.

Voyager was, in fact, aware of these shortcomings – a bank that it previously did business with warned it in 2021 that its claims of security were “potentially misleading.”

Undaunted, Ehrlich wrote a letter to clients in June the following year, claiming that Voyager was “well-capitalized and positioned to weather the bear market,” and that funds were “as safe with us as at a bank.”

“Two weeks later, the company froze consumers’ access to their accounts,” said the FTC.

Ehrlich is also accused of transferring millions in funds to his wife, Francine, presumably to avoid their being traced back to any alleged unlawful activities. Francine is only named as a “relief defendant” in the case and is therefore not implicated in any wrongdoing herself.

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