UNITED STATES: A U.S. banking regulator on Friday ordered crypto exchange FTX to abstain from posting what it called “false and misleading” claims by the exchange about whether the company’s funds are insured by the government.
The Federal Deposit Insurance Corporation said in a July tweet by Brett Harrison, head of FTX’s U.S. operations, contained misleading claims that funds held at and shares purchased through FTX were insured by the The Federal Deposit Insurance Corporation (FDIC) and ordered the company to remove any misleading language from its social media accounts and websites.
In a tweet that Harrison has since deleted, he said that direct deposits from employers to the crypto exchange are “held in individual FDIC-insured bank accounts” and that shares purchased through FTX US “are held in FDIC-insured brokerage accounts.” In its cease-and-desist letter to FTX US, the FDIC said these statements indicate that FDIC insurance is available for cryptocurrency and stock holdings and that the agency does not insure brokerage accounts.
In a tweet Friday, FTX CEO Sam Bankman-Fried emphasized that FTX is not FDIC insured and apologised if anyone misinterpreted previous comments.
The order, one of five the FDIC sent to crypto firms on Friday, comes as regulators have stepped up efforts to scrutinize crypto firms that may have mislead investors about whether their funds are backed by the government. This issue has come to a head recently as the upheavals in the crypto market have led to stress and the collapse of some major firms.
The banking regulator issued a similar cease-and-desist letter to bankrupt crypto firm Voyager Digital, arguing that the company misled customers by claiming their funds with Voyager would be covered by the FDIC.
Later, the FDIC issued advisory urging banks that do business with crypto companies to ensure customers know what types of assets are government-insured, especially in cases where firms offer a mix of uninsured crypto products alongside insured bank deposit products.
Also Read: The ‘Blockchain Dilemma’ in the Cryptocurrency World
