The Federal Deposit Insurance Corporation (FDIC) slapped the Sam Bankman-Fried-owned cryptocurrency trade FTX with a cease-and-desist order over “false and misleading statements” that recommend its property are FDIC-insured. The FDIC doesn’t cover stocks or crypto, and solely safeguards funds held in insured financial institution accounts.
In a letter to the exchange, the FDIC factors to a now-deleted tweet from FTX president Brett Harrison, which states “direct deposits from employers to FTX US are stored in individually FDIC-insured bank accounts in the users’ names.” The referenced tweet additionally says that “stocks are held in FDIC-insured and SIPC [Security Investor Protection Corporation]-insured brokerage accounts.” The FDIC claims this falsely represents that FTX and the funds invested by customers are FDIC-insured after they’re actually not.
While not flagged within the FDIC’s letter, customers have additionally identified one other potentially misleading tweet from Harrison that says “cash associated with brokerage accounts is managed into FDIC-insured accounts” at FTX’s “partner bank.”
We actually didn’t imply to mislead anybody, and we didn’t recommend that FTX US itself, or that crypto/non-fiat property, profit from FDIC insurance coverage. I hope this gives readability on our intentions. Happy to work instantly with the FDIC on these essential matters.
— Brett Harrison (@Brett_FTX) August 19, 2022
1) Clear communication is de facto essential; sorry!
FTX doesn’t have FDIC insurance coverage (and we have by no means stated so on web site and many others.); banks we work with do. We by no means meant in any other case, and apologize if anybody misinterpreted it. https://t.co/MHMSMDE8Le
— SBF (@SBF_FTX) August 19, 2022
Harrison has since issued a response to the FDIC’s letter, explaining that FTX “really didn’t mean to mislead anyone,” and claims FTX “didn’t suggest that FTX US itself, or that crypto/non-fiat assets, benefit from FDIC insurance.” FTX CEO and founder Bankman-Fried provided further clarification as properly, stating that whereas “FTX does not have FDIC insurance,” the banks it does enterprise with do. Bankman-Fried provides that it could “explore potential ways that individual accounts using direct deposit… could, in the future, be used to further protect customers,” and that FTX “would be excited to work with the FDIC on that.”
As famous by the FDIC, the Federal Deposit Insurance Act (FDI Act) prohibits corporations from ”implying that their merchandise are FDIC–insured by utilizing ‘FDIC’ within the firm’s title, ads, or different paperwork.” The FDIC is giving FTX 15 days to supply affirmation that it has eliminated or corrected any alleged misrepresentations. In addition to FTX, the FDIC doled out cease-and-desist warnings to 4 different corporations, together with Cryptonews.com, Cryptosec.information, GoodAsset.com, and FDICCrypto.com.
The FDIC declined to remark past the contents of its letter, and FTX didn’t instantly reply to The Verge’s request for remark.
Like Robinhood, FTX has started offering both traditional stock and crypto buying and selling choices. In May, crypto billionaire Bankman-Fried disclosed a 7.6 percent stake in Robinhood, and he’s reportedly looking into purchasing the trading platform.
Even with the so-called crypto winter driving a number of crypto companies to bankruptcy, FTX and Bankman-Fried’s crypto buying and selling agency Alameda Research have someway managed to remain afloat. Bankman-Fried has prolonged traces of credit score to quite a few struggling crypto corporations to assist them climate the unsure economic system, and told Reuters he has “a few billion” more for future bailouts. According to documents obtained by CNBC, FTX introduced in $1.02 billion in income in 2021 and $270 million within the first quarter of 2022.