FDIC Sends Cease-and-Desist Letter to Crypto Companies Over Misleading Claims About Deposit Protection

Several cryptocurrency platforms received cease and desist letters from the Federal Insurance Deposit Corporation over allegedly making misleading claims to investors about their funds being protected by federal insurance.

The FDIC on Friday sent letters to five crypto companies, including Cryptonews.com, Cryptosec.info, SmartAsset.com, FDICCrypto.com and US-based exchange FTX US, accusing them of falsely telling customers their crypto deposits were insured by the government. “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 that stocks held in brokerage accounts are FDIC-insured,” the regulator commented in a press release.

The regulator instructed the companies in question to “take immediate corrective action to address these false or misleading statements,” since inaccurately misrepresenting an uninsured security as FDIC-insured is against the Federal Deposit Insurance Act. In particular, the letter sent to the president of FTX US, Brett Harrison, alleges he made an inaccurate claim when he said employers’ direct deposits are held in FDIC-insured accounts.

“In fact, FTX US is not FDIC insured, the FDIC does not insure any brokerage accounts, and FDIC insurance does not cover stock or cryptocurrencies. The FDIC only insures deposits held in insured banks and savings associations (insured institutions), and FDIC only protects against losses caused by failure of insured institutions,” the letter read, as cited by Yahoo Finance. Harrison has since taken to twitter to clarify his previous statement, assuring that he deleted his previous tweet, and adding: “We really didn’t mean to mislead anyone, and we didn’t suggest that FTX US itself, or that crypto/non-fiat assets, benefit from FDIC insurance. I hope this provides clarity on our intentions.”

Information for this briefing was found via Yahoo Finance and Twitter. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.

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