FTX Ordered To Stop Making “False and Misleading” Representations

A U.S. bank regulator ordered cryptocurrency exchange FTX to stop making “false and misleading” claims about whether the company’s funds are insured by the government on Friday.

The Federal Deposit Insurance Corporation claimed that Brett Harrison, the head of FTX’s U.S. operations, made false claims in a tweet in July that funds held at and stocks bought through FTX were FDIC-insured. As a result, the FDIC ordered the company to delete any false statements from its websites and social media accounts.

Harrison later removed the tweet in which he claimed that equities bought through FTX US “are held in FDIC-insured” brokerage accounts and that direct contributions from employers to the cryptocurrency exchange are “stored in personally FDIC-insured bank accounts.” In its cease and desist letter to FTX US, the FDIC stated that these claims implied that the agency’s insurance coverage was available for stock and cryptocurrency holdings, although it does not insure brokerage accounts.

In a tweet on Friday, Sam Bankman-Fried, the CEO of FTX, apologized for any misunderstandings caused by earlier statements and clarified that FTX is not FDIC-insured.

The FDIC on Friday issued five orders to cryptocurrency companies, and this one was one of them. Regulators have stepped up their attempts to crack down on companies that may be deceiving investors about whether or not their funds are insured by the government. The problem has intensified recently as a result of stress brought on by the cryptocurrency market instability and the failure of some well-known firms.

The bank regulator said that the bankrupt cryptocurrency startup Voyager Digital had deceived clients by saying their funds would be protected by the FDIC and sent them a similar cease and desist letter.

Later, the FDIC issued a warning advising banks working with cryptocurrency firms to make sure that clients are informed of what kinds of assets are covered by government insurance, especially when the firm offers a mix of insured and uninsured crypto products.

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