On August 19, The Federal Deposit Insurance Corporation (FDIC) issued various cease and desist letters to five cryptocurrency companies including FTX US, owned by the crypto billionaire Sam Bankman-Fried, along with news outlets Cryptonews.com, Cryptosec.info, SmartAsset.com, and the site FDICCrypto.com.
The FDIC asked the aforementioned companies to cease making “false or misleading statements” regarding their relationship with the FDIC.
According to the FDIC, FTX US and the other companies said that certain cryptocurrency-related products or services they offered were FDIC-insured.
One such company even deceptively registered a domain where it “suggests affiliation with or endorsement by the FDIC,” an activity that is totally prohibited by The Federal Deposit Insurance Act (FDI Act). FDICCrypto.com redirects to a site that offers a variety of services, including a cryptocurrency service provider.
FTX Us May Have Violated the Federal Deposit Insurance Act
According to the FDIC, FTX US and its related entities may have violated FDIC laws by making “false and misleading statements, directly or by implication, concerning FTX US’s deposit insurance status.”
Apparently, on July 20, 2022, Brett Harrison, president of FTX US, tweeted on his official account stating that direct deposits from the company’s employees were stored in individually FDIC-insured bank accounts. His exact words, as quoted by the FDIC, were:
“Direct deposits from employers to FTX US are stored in individually FDIC-insured bank accounts in the user’s names,” … “stocks are held in FDIC-insured and SIPC-insured brokerage accounts.”
In addition, the FDIC indicated that FTX.US presented itself as an “FDIC-insured” cryptocurrency exchange on the SmartAsset.com website and on CryptoSec.Info.
Brett Harrison: “Happy To Work Directly With the FDIC”
The FDIC clarified that it does not insure any type of brokerage account and does not cover any kind of stocks or cryptocurrencies. Hence, the information promoted by FTX US is totally false, so they could take legal action against the exchange for misusing FDIC’s name.
Therefore, FTX US has 15 business days from the publication of the release to provide a written letter to the FDIC showing compliance with the requests made, detailing all efforts made to remove all material linking them to the FDIC. Failure to comply with the request could result in the exchange facing further legal action.
Similarly, Cryptonews.com received a cease and desist letter from the FDIC for publishing false reviews of cryptocurrency exchanges such as Coinbase, Gemini, and eToro, noting that they are regulated and insured by the FDIC.
Brett Harrison, President of FTX US, acknowledged earlier today that he indeed wrote the tweet and clarified that he deleted it upon request by the FDIC. Harrison later added that FTX US acted in good faith and emphasized the exchange’s commitment to work hand in hand with American regulators: