FDIC sends 5 companies, including FTX.US, cease and desist letters for making false statements about deposit insurance

The Federal Deposit Insurance Corp. (FDIC) said Aug. 19 that it issued letters demanding Cryptonews.com, Cryptoytosec.info, SmartAsset.com, FTX.US and FDICCrypto.com to stop making misleading statements about FDIC deposit insurance and implement corrective measures. 

FDIC deposit insurance protects customers in the unlikely event of the failure of an FDIC-insured bank.  

In the cease and desist letters sent Aug. 18, the FDIC demanded that the companies, their officers and employees abstain from alluding to any presence of FDIC deposit insurance at certain exchanges or their own platforms. It also demanded that the companies take immediate measures to correct any false and misleading statements made previously. 

The FDIC alleges in the text of the letters that each entity has purportedly misrepresented the depository insurance status of holdings or furthered falsehoods concerning deposit insurance coverage. 

Based on the evidence presented by the FDIC in the letter, each of the companies allegedly made false representations — including on their websites and social media accounts — stating or suggesting that certain crypto-related products are FDIC-insured or that stocks held in brokerage accounts are FDIC-insured. 

According to the FDIC’s letter to FTX.US, President Brett Harrison tweeted on July 20 that “direct deposits from employers to FTX US are stored in individually FDIC-insured bank accounts in the users’ names,” and “stocks are held in FDIC-insured and SIPC-insured brokerage accounts.”

The regulator claims these statements contain false and misleading representations of the company’s uninsured products. It added:

“In fact, FTX US is not FDIC-insured, the FDIC does not insure any brokerage accounts, and FDIC insurance does not cover stocks or cryptocurrency. “

The regulator, in its letter to Cryptonews.com, listed five instances, out of many cited, where the website had allegedly either misrepresented or mischaracterized the FDIC-insured claims in their reviews of crypto exchanges.

The FDIC singled out Cryptosec.info for allegedly including a list of “FDIC-insured Crypto Exchanges” on its website along with the use of the FDIC’s official seal. SmartAsset.com also contributed to a list of supposed FDIC-insured crypto exchanges that the FDIC has asked be removed.

The regulator alleges that FDICCrypto.com used the agency’s name in its registered domain name. This, according to the FDIC, suggests affiliation with or endorsement by the FDIC, and it has demanded the company cease the use of the domain name or similar domain names immediately.

The FDIC demanded that all companies remove the offending examples from their respective spaces and called for each entity to conduct a scrubbing of any additional misleading statements and report back in 15 days with compliance.

Posted In: Legal, Regulation

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