The Federal Deposit Insurance Corporation (FDIC) issued letters demanding five companies and their officers, directors, and employees cease and desist from making false and misleading statements about FDIC deposit insurance and take immediate corrective action to address these false or misleading claims.
Here is more information from the FDIC’s post:
Based upon evidence collected by the FDIC, each of these companies made false representations – including on their websites and social media accounts – stating or suggesting that certain crypto-related products are FDIC-insured or the stocks held in brokerage accounts are FDIC-insurance. In one case, a company offering a so-called cryptocurrency also registered a domain name that suggests affiliation with or endorsement by the FDIC. These representations are false and misleading.
The Federal Deposit Insurance Act (FDI Act) prohibits any person from representing or implying that an uninsured product is FDIC-issued or from knowingly misrepresenting the extent and manner of deposit insurance. The FDI Act further prohibits companies from implying that their products are FDIC-insured by using “FDIC” in the company’s name, advertisements, or other documents. The FDIC is authorized by the FDI Act to enforce this prohibition against any person.
The FDIC sent cease and desist letters to the following crypto-companies: Cryptonews.com, Cryptosec.info, SmartAsset.com, FTX US, and FDICCrypto.com.
The FDIC provided examples of the misinformation posted by Cryptonews:
“Coinbase is one of a few exchanges which is actually regulated and insured by FDIC”
“Coinbase is FDIC insured exchange, meaning that all the funds are kept online (remaining 2%) are protected against theft.”
“eToro’s US users will be glad to know that their cash funds up to USD 250,000 are FDIC-insured, meaning you are guaranteed to get your funds back even in the event of eToro’s failure.”
“Gemini is described as “one of the biggest regulated crypto exchanges with the FDIC insurance for USD deposits, a user-friendly platform, and zero publicly known large scale hacks”
The FDIC also wrote the following in the letter to SmartAsset:
“Among other false and misleading statements, SmartAsset published an article on its website entitled, “List of FDIC-Insured Crypto Exchanges”… “This article includes, among other statements, the claim that “[w]ith those [purportedly insured] exchanges, if you lose your money on deposit the FDIC will reimburse those losses up to the program’s cap.” The article also includes a list of cryptocurrency exchanges that it claims offer FDIC insurance.”
The FDIC also wrote the following in the letter to FDICCrypto.com:
“The FDIC demand that you cease use of the domain name www.fdiccrypto.com, as well as any similar website domain names, immediately. This demand applies to the use of the website with the domain name www.fdiccrypto.com as well as advertising or consumer-facing documenting referencing fdiccrypto. The FDIC further demands that, within fifteen (15) business days of receipt of this letter, you provide written confirmation to the undersigned that you have complied with this demand.”
CNBC reported that in a letter specifically sent to FTX US, the FDIC said it appeared that on July 20, Brett Harrison, the president of FTX.US, published a tweet stating that direct deposits from employers are stored in FDIC-insured accounts in the user’s name.
According to CNBC, Harrison tweeted on Friday that he deleted the post and didn’t mean to indicate that crypto assets stored in FTX are insured by the FDIC, but rather “USD deposits from employers were held at insured banks.”
In my opinion, it is incredibly unwise to make it sound as though the FDIC has endorsed, or will pay back losses of cryptocurrency, when it is abundantly clear that the FDIC wants no part of that. These types of shenanigans are deceitful and potentially harmful to those who engage with disingenuous crypto companies.