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FTX US Hit With FDIC Cease-and-Desist Over 'False and Misleading' Statements

“We really didn’t mean to mislead anyone,” FTX US CEO Brett Harrison tweeted today in response to the letter.

2 min read
The FDIC is an independent U.S. agency put in place in 1933. Image: Shutterstock.

Five crypto companies, including FTX US, the U.S.-based arm of CEO Sam Bankman-Fried’s cryptocurrency exchange FTX, were today issued cease-and-desist letters from the Federal Deposit Insurance Corporation. 

Cryptonews.com, Cryptosec.info, SmartAsset.com, and FDICCrypto.com also received cease and desist letters on Friday, which the agency says were in response to them making “false representations” that their products were FDIC-insured.

In all cases, the companies have 15 days to remove the "false and misleading statements" from their websites and social media accounts and send written confirmation to the FDIC.

In its letter to FTX US, the FDIC called attention to a now-deleted tweet that CEO Brett Harrison sent on July 20 that read “direct deposits from employers to FTX US are stored in individually FDIC-insured bank accounts in the users’ names.” 

“We really didn’t mean to mislead anyone,” Harrison tweeted today in response to the letter, “and we didn’t suggest that FTX US itself, or that crypto/non-fiat assets, benefit from FDIC insurance.” Harrison added that he hopes this “provides clarity” on the company’s intentions.

The agency said Cryptonews.com published reviews of cryptocurrency exchanges saying that Coinbase, eToro US, Crypto.com, and Gemini were insured by FDIC. For CryptoSec.com and SmartAsset.com, the banking regulator called attention to pages on the websites that include lists of “FDIC-insured cryptocurrency exchanges.”

For FDICCrypto.com, the agency alleges that the website’s owner registered the domain at the end of July and has been redirecting traffic to another site that offers crypto products. The FDIC is demanding that the owner immediately stop using the domain name.

The letters come just days after Sen. Pat Toomey (R-PA) released a letter he sent to the banking agency saying that his office had received multiple accounts from whistleblowers saying that “personnel in the FDIC’s Washington, D.C. headquarters are urging FDIC regional offices to send letters to multiple banks requesting that they refrain from expanding relationships with crypto-related companies.”

On Wednesday, the FDIC told Decrypt that its actions were consistent with its responsibility to make sure banks engage with crypto in a safe way.

“This may involve the FDIC requesting that an institution delay initiating or refrain from expanding crypto-related activities until supervisory feedback is taken into account,” an agency spokesperson said in an email. “Given the risks readily apparent in the crypto-asset markets, these are necessary and appropriate actions to take.”

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