FDIC Issues Cease and Desist Letters to FTX US and Four Other Companies Over False Statements
A Federal Deposit Insurance Corporation (FDIC) announced on Friday, August 19th, that it is sending cease and desist letters to five crypto-related companies. Apparently, the companies in question made false or misleading statements with regards to their affiliation with FDIC—or a lack thereof.
Which Companies Got a Letter From FDIC?
Several recognizable crypto-related firms found themselves on the receiving end of FDIC letters. These are FTX US, Cryptonews.com, Cryptosec.info, SmartAsset.com, and FDICCrypto.com.
While each of these companies made different transgressions, the common theme is that they misused the FDIC name. The most noticeable example is FDICCrypto.com which, according to the Federal Deposit Insurance Corporation, is “a company offering a so-called cryptocurrency also registered a domain name that suggests affiliation with or endorsement by the FDIC.”
In other cases, the companies on the list made statements that imply that various accounts or platforms that have no relation to FDIC are FDIC insured. The Federal Deposit also explained that it primarily insures accounts held by major banks, and detailed why the firms in question ran afoul of the Federal Deposit Insurance Act (FDI Act)
The Federal Deposit Insurance Act (FDI Act) prohibits any person from representing or implying that an uninsured product is FDIC-insured 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.
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What Will These Companies Have to Do?
In its letter, FDIC demands that all offending parties remove any and all statements that imply a connection between an uninsured product and the Federal Deposit. In most cases, these are in the form of articles stating that certain crypto exchanges, brokerages, and accounts are insured.
For example, the letter sent to Cryptosec.info demands that the page regarding FDIC-insured crypto exchanges be amended or removed. This certainly showcases that while the Federal Deposit took an interest in crypto, that interest is mainly in the form of providing guidance to major banks with regard to digital assets.
Distinctly, the letter sent to FDICCrypto.com outright demands that the website relinquish its name since it is alluding to a non-existent connection with the Federal Deposit. FTX US is similarly required to remove all misleading statements pertaining to FDIC and refrain from publishing anything similar again.
It also identifies a Tweet made by Brett Harrison, the president of FTX US as an offending statement. Apparently, Harrison’s tweet claimed that “direct deposits from employers to FTX US are stored in individually FDIC-insured bank accounts in the user’s names” and made some other untrue statements.
All of these companies are given 15 days to challenge the cease and desist letters by providing a list of statements they believe are true. If they are unable to do this, they have the same amount of time to remove all offending statements.
Do you think that false statements and promises are commonplace among cryptocurrency exchanges? Let us know in the comments below.