The crypto exchange FTX, controlled by Sam Bankman-Fried, received a cease-and-desist warning on Friday from the Federal Deposit Insurance Corporation (FDIC), telling the company to stop “misleading” consumers about the insurance status of their funds. The FDIC issued letters to FTX.US, Cryptonews.com, Cryptosec.info, SmartAsset.com, and FDICCrypto.com. Unlike deposits held at U.S. banks, cryptocurrencies stored with brokerages are not protected by the government.
In the letter to FTX, the FDIC said that Brett Harrison (LinkedIn), president of FTX.US, published a tweet stating that direct deposits from employers are stored in FDIC-insured accounts. Harrison deleted that tweet and didn’t mean to indicate that crypto assets stored in FTX are insured by the FDIC, but rather “USD deposits from employers were held at insured banks.”
“Based upon evidence collected by the FDIC, each of these companies made false representations —including on their websites and social media accounts — stating or suggesting that certain crypto-related products are FDIC-insured or that stocks held in brokerage accounts are FDIC-insured,”
FDIC press release
The FDIC said the companies must “take immediate corrective action to address these false or misleading statements.” The agency said knowingly misrepresenting or implying that an uninsured product is FDIC-insured violates the Federal Deposit Insurance Act.
