As reported by Reuters, Fed and FDIC issued a cease and desist letter to the crypto company on Thursday, stating that Voyager made “false and misleading” claims about depositary insurance.
Regulators step in
The regulators ordered Voyager to immediately remove all statements, representations, or references that suggest that the company was insured by the FDIC, that customers who deposited their funds on the platform would have their crypto insured, and that the FDIC would insure customers against the failure of Voyager itself.
“These representations are false and misleading and, based on the information we have to date, it appears that the representations likely misled and were relied upon by customers who placed their funds with Voyager and do not have immediate access to their funds,” Fed and FDIC wrote in a joint letter.
The firm is obligated to submit written confirmation that it has fully complied with the request within two business days. However, it was added that a prompt response wouldn’t preclude regulators from taking further action against Voyager.
Voyager’s insurance misrepresentation
Previously, the now-bankrupt company made various statements that indicated it was insured by the government. Now it looks like Voyager is taking steps to comply with the request from regulators, updating blog posts where FDIC was mentioned.
As noticed by Decrypt, the company redacted the original December 2019 blog post titled, "USD held with Voyager is now FDIC Insured," where it claimed that in case of failure, a federal agency guarantees customers a full reimbursement of up to $250,000. Now the website says that Voyager maintains customers’ cash account at Metropolitan Commercial Bank (MCB), which is FDIC-insured.
Voyager’s claims regarding deposit insurance have already been investigated by regulators in the past. Metropolitan Bank even felt obliged to issue an official statement, stating that "FDIC insurance coverage is available only to protect against the failure of Metropolitan Commercial Bank. FDIC insurance does not protect against the failure of Voyager, any act or omission of Voyager or its employees, or the loss in value of cryptocurrency or other assets."
Voyager refund prospects
On July 11, Voyager announced that customers’ fiat deposits will be returned in full “after a reconciliation and fraud prevention process.” However, its plan to refund crypto assets is yet to be approved by the court. Currently, Voyager has approximately $1.3 billion of crypto assets on its platform, plus it’s owed more than $650 million from the insolvent Three Arrows Capital.
The reorganization plan proposes that customers will receive a mix of pro-rata share of crypto, pro-rata share of proceeds from 3AC recovery, pro-rata share of common shares in the newly organized company, and pro-rata share of existing Voyager tokens.
“At this stage, we are proposing that customers will receive their crypto as described above. However, the exact numbers will depend on what happens in the restructuring process and the recovery of 3AC assets. We understand how important this issue is and will provide updates as soon as possible,” Voyager wrote in the official statement.
The crypto lender filed for Chapter 11 bankruptcy on July 6, blaming the prolonged bear market and 3AC default. A Chapter 11 case allows the company to continue operating its business and undergo the reorganization process, paying creditors over time. So far, it’s unclear when Voyager investors will get their crypto refunds and whether they will be full.