The United States (US) Commodity Futures Trading Commission (CFTC) and the Federal Trade Commission (FTC) have simultaneously initiated legal actions against Stephen Ehrlich, the former CEO of Voyager Digital https://www.coinlive.com/news-detail/180131, a cryptocurrency lending firm.
Their allegations revolve around claims of fraudulent activities and the intentional misrepresentation of government protections for customers.
The CFTC’s court filing additionally categorises Circle’s USDC stablecoin and bitcoin as commodities.
The allegations encompass fraud and “registration failures” linked to the platform and its unregistered commodity pool.
CFTC enforcement director Ian McGinley said:
“Ehrlich and Voyager lied to Voyager customers. While representing they would treat customers’ digital asset commodities safely and responsibly, behind the scenes, they took shockingly reckless risks with their customers’ assets, leading to Voyager’s bankruptcy and huge customer losses. When their business began to collapse, they continued lying to their customers, concealing Voyager’s true financial health.”
The commission has expressed its intention to seek restitution, disgorgement, civil monetary penalties, as well as impose permanent trading and registration bans.
However, it is worth noting that one of the agency’s commissioners, Caroline Pham, raised objections to the CFTC’s stance, arguing that their interpretation of Voyager‘s status as a commodity pool operator does not align with the law.
In her statement on Thursday, she questioned whether the CFTC’s definition of commodity pools should encompass common lending activities such as accepting deposits and providing loans.
The CFTC also utilised this opportunity to officially declare certain digital assets, including BTC, USDC, and others, as “commodities,” a classification consistent with their recent cases.
In a parallel move, the FTC announced a settlement with Voyager that permanently prohibits the firm from managing consumers’ assets.
Simultaneously, they filed a lawsuit in the US District Court for the Southern District of New York against Stephen.
This legal action stems from his claims that Voyager accounts were insured by the Federal Deposit Insurance Corporation (FDIC) and were deemed “safe.”
As part of the proposed settlement, Voyager and its affiliates will be subject to a $1.65 billion fee.
The FTC’s complaint primarily centres on Voyager’s assertion that deposits in USD Coin were insured by the FDIC.
Samuel Levine, director of the FTC’s Bureau of Consumer Protection, expressed:
“This action reminds companies and individuals: Don’t play fast and loose with claims about FDIC insurance.”
Notably, Stephen is alleged to have transferred substantial sums of money from Voyager to his wife, Francine, who has been named as a relief defendant in the FTC’s case.
Both lawsuits pivot around purportedly fraudulent statements made by Stephen concerning Voyager’s financial stability in 2022.
This legal action against cryptocurrency firms and their executives parallels ongoing cases, including those against former Celsius CEO Alex Mashinsky and former FTX CEO Sam Bankman-Fried, whose first criminal trial commenced on 3 October.