FDIC Orders FTX US, 4 Other Companies to Cease and Desist 'Misleading' Consumers

The FDIC published five cease-and-desist orders Friday, including to FTX.US, alleging they mislead investors by suggesting they had coverage from the deposit insurance provider.

Cryptonews.com, Cryptosec.com, SmartAsset.com and FDICCrypto.com were the other four websites directed to cease these alleged misrepresentations. The FDIC said these "companies made false representations" which suggested their products might be insured by the regulator. The FDIC covers federally regulated bank accounts, up to $250,000 per account.

The FDIC has previously ordered Voyager Digital to cease any claims that implied its customers' funds might have been protected by the FDIC. It later issued a broader warning to the crypto industry at large, saying its protections extend to banks but not to crypto companies that have bank accounts. Friday's letters said several other

"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 press release said. "The FDIC is authorized by the FDI Act to enforce this prohibition against any person."

FTX US President Brett Harrison said that any direct deposits from employers to FTX US would be stored in FDIC-insured bank accounts in a tweet that has since been deleted.

In a letter directed to Harrison and FTX US Chief Regulatory Officer Dan Friedberg, FDIC Assistant General Counsel Seth Rosebrock wrote that Harrison's tweet may "contain false and misleading" statements. SmartAsset and CryptoSEC also said that FTX was "FDIC-insured," he wrote.

"These statements appear to contain false and misleading representations that uninsured products are insured by the FDIC, as well as false and misleading statements about the extent and manner of protection provided by FDIC deposit insurance and misuse the FDIC's name," he wrote. "These false and misleading statements represent or imply that FTX US is FDIC-insured, that funds deposited with FTX US are placed, and all times remain, in accounts at unnamed FDIC-insured banks, that brokerage accounts at FTX US are FDIC-insured, and that FDIC insurance is available for cryptocurrency or stocks."

FTX US is not insured by the FDIC, and the regulator does not insure brokerage accounts or cover stocks and cryptocurrencies, he continued.

The four other recipients claimed that crypto exchanges like Coinbase, Gemini and eToro were FDIC-insured, and the letters directed at these platforms order them to clarify that this is not, in fact, accurate.

UPDATE (Aug. 19, 2022, 18:35 UTC): Updated with additional information.