Crypto firm FTX receives cease and desist from FDIC about insurance

Sam Bankman-Fried, founder and chief government officer of FTX Cryptocurrency Derivatives Exchange, speaks throughout an interview on an episode of Bloomberg Wealth with David Rubenstein in New York, US, on Wednesday, Aug 17, 2022.

Jeenah Moon | Bloomberg | Getty Images

FTX, the crypto trade managed by Sam Bankman-Fried, acquired a cease-and-desist warning on Friday from the Federal Deposit Insurance Corporation, telling the corporate to cease “misleading” customers about the insurance standing of their funds.

The FDIC issued letters to 5 crypto firms, together with FTX US. Unlike deposits held at U.S. banks, cryptocurrencies saved with brokerages aren’t protected by the federal government.

“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,” the regulator mentioned in a press launch.

In addition to FTX US, the FDIC notified Cryptonews.com, Cryptosec.information, SmartAsset.com and FDICCrypto.com. The FDIC mentioned the businesses should “take immediate corrective action to address these false or misleading statements.” The company mentioned knowingly misrepresenting or implying that an uninsured product is FDIC-insured is prohibited by the Federal Deposit Insurance Act.

In the letter particularly to FTX, the FDIC mentioned it appeared that on July 20, Brett Harrison, the president of FTX.US, printed a tweet stating that direct deposits from employers are saved in FDIC-insured accounts within the person’s identify.

Harrison tweeted on Friday that he deleted that submit and did not imply to point that crypto property saved in FTX are insured by the FDIC, however moderately “USD deposits from employers were held at insured banks.”

“We really didn’t mean to mislead anyone, and we didn’t suggest that FTX US itself, or that crypto/non-fiat assets, benefit from FDIC insurance,” Harrison wrote.

FTX.US is a U.S. cryptocurrency trade owned by FTX, which is predicated within the Bahamas and has been largely targeted on constructing its enterprise exterior of the U.S.

The FDIC additionally mentioned that the web sites for SmartAsset and CryptoSec determine FTX as an “‘FDIC-insured’ cryptocurrency exchange.”

WATCH: Sam Bankfman-Fried’s portfolio

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