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The U.S. Federal Deposit Insurance Corporation (FDIC) issued a cease and desist notice to Georgia-based technology company Unbanked, Inc. on Friday, citing false and misleading claims made by the crypto firm related to its insurance status.
The FDIC alleges that Unbanked, which provided crypto debit card services, falsely implied that financial products, such as cryptocurrencies, are insured by the FDIC. The agency has made it a point to go after companies it believes are making these claims.
“Unbanked has advertised the availability of FDIC insurance on its website above marketing regarding checking accounts and the ability to 'deposit, withdraw, and seamlessly trade between a number of crypto assets' without a disclaimer that the crypto assets are not FDIC insured or guaranteed,” the agency wrote.
But the federal bureaucracy may have gotten in the way of the letter to Unbanked Inc. going out. Unbanked, in fact, first became aware of the cease and desist notice from Decrypt’s inquiry after the FDIC announced the notice on its official mailing list.
In June, Unbanked announced that the company would be winding down its operations and advised members to remove their assets from the site.
“All Unbanked customers and those through our white-label programs should begin withdrawing all funds (crypto and USD) as soon as possible,” Unbanked said in a letter shared on Twitter on June 19. “We plan to leave the withdrawal functionality on for the next 30 days, but please do not wait to start withdrawing funds.”
In its letter to customers, Unbanked said the decision to cease operations came after a $5 million investment failed to materialize.
“We have not received those funds as of this moment,” Unbanked said. “We are still optimistic that we will receive these funds; if we do—Unbanked will resume operations and will be stronger than ever. However, the money doesn’t count until it’s in the bank,” the company said, adding that it would continue to explore alternative funding sources.
Unbanked also cited a challenging regulatory environment in the United States in its decisions to cease operations.
The Unbanked dashboard (and all white-label dashboards) will be going offline on the 25th of June, 2023.
Please act now to ensure you have withdrawn all of your crypto and fiat from your account before this date. pic.twitter.com/tRbYg4HfCn
— Unbanked (@UnbankedHQ) June 19, 2023
“We hope that one day, perhaps sooner than later, we can revive Unbanked or another company with better funding can continue on with our core mission,” the company said.
The FDIC pointed to posts made by Unbanked on social media that the agency says claim being FDIC insured.
"A company’s intent to wind down operations doesn’t mean it has ceased operations," a FDIC spokesperson told Decrypt, adding that anything further would need to be addressed with FDIC general counsel.
The FDIC has demanded that Unbanked, Inc. immediately remove any statements suggesting that funds held in cryptocurrencies or other uninsured financial products are protected by FDIC insurance.
The agency has given Unbanked 15 days to provide written confirmation that the firm has complied with the order and also demands that Unbanked cease making such statements in the future.
The FDIC has gone after other cryptocurrency companies over claims that assets were FDIC insured. Last year, the agency opened an investigation into bankrupt Voyager Digital after the company said its assets were insured. In reality, it was only the bank Voyager Digital did business with, Metropolitan Commercial Bank, that was insured.
In June, the FDIC warned cryptocurrency exchange OKCoin over “false and misleading statements” on its website and promotional channels.
Unbanked co-founder Daniel Gouldman told Decrypt that while the company has already ceased operations it fully intends to comply with the FDIC’s request.
“Over our five years in operation we were always very proud of our commitment to complying with laws in any jurisdiction we operated,” Gouldman said. “When we were operational, we did offer FDIC-insured bank accounts from our bank partners and those bank accounts allowed customers to buy and sell crypto,” Gouldman said, reiterating that Unbanked was never a bank.
“The crypto was never FDIC insured, and we never intended to infer that it was," he said. "We're actively working to resolve this.”