It would be a hoot if regulators cracked down on companies BEFORE they freeze customer deposits and crypto and file for bankruptcy

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The bankrupt Voyager receives a cease and desist order from the Fed and FDIC after it is too late.

By Wolf Richter for WOLF STREET.

Tonight, the Federal Reserve Board and the FDIC, as banking regulators, issued a joint press release, informing the world that they sent a joint letter to Voyager Digital today, demanding that Voyager “cease and desist from making false and misleading statements regarding your FDIC deposit insurance status.”

Voyager Digital is or was a cryptocurrency platform, cryptocurrency lender, and crypto broker that enticed customers to deposit their crypto and fiat money there, and then on July 1, suspended all withdrawals and transactions, and then on july 6th he filed for bankruptcy, and whoever had any of the money, fiat or crypto, or whatever on the platform is now an unsecured creditor in a bankruptcy case, and they have no idea if will they ever get some of their money back, fiat or crypto.

Voyager is part of the now collapsed Decentralized Finance (DeFi) creature that was supposed to replace the FDIC member banks.

The Federal Reserve and the FDIC said today that these false and misleading representations about FDIC insurance by Voyager “likely misled and were relied on by customers who deposited their funds with Voyager.”

“Voyager and certain officers and employees” made representations on its website, mobile app, and social media, “stating or suggesting that”:

  • Voyager itself is FDIC insured;
  • Customers who deposited their money or crypto or whatever on Voyager would receive FDIC insurance coverage for all of their funds.
  • The FDIC would insure customers against the failure of Voyager itself.

The people who believed in those FDIC insurance representations and were induced by them to send their crypto and fiat or whatever to Voyager were the same people who believed and were induced by Voyager’s promise that it would pay interest rates of up to 12% on your performance. products The entire DeFi segment was based on belief. You had to believe in it.

Regulators noted:

“Voyager maintains a deposit account for the benefit of its clients at the Metropolitan Commercial Bank, which is supervised by the Board.

“However, Voyager is not FDIC insured, so customers who invested through its cryptocurrency platform would not receive insurance coverage in the event of Voyager failure.”

Granted, there is no FDIC insurance on Voyager, regardless of what Voyager has said about it. We get that.

And now the great and brutal regulatory crackdown with an iron fist, after… I mean like weeks after: all cleaned up and it’s too late for anything:

“We hereby demand that Voyager cease and desist, and take immediate corrective action to address these false and misleading claims,” ​​the regulators said.

Step One: “Voyager will promptly remove” any offensive statements, depictions, or references from “Voyager’s websites (including disclosures of pop-ups, hyperlinks, or chat bots), Twitter, and other social media accounts (including corporate and Voyager senior management personal accounts), mobile app, online POS, and all forms (electronic and print) of marketing, advertising, or consumer-facing materials and communications.”

And step two: “Within two (2) business days of receipt of this letter, Voyager must provide written confirmation to the FDIC and the Board of Governors that it has fully complied with the requests set forth above.”

And that is.

The thing is, regulators don’t step in when the creature is booming and when people are eagerly putting their money or cryptocurrencies in there, thinking they’re going to earn 12% a year with no risk, or whatever, plus quadruple their money in their cryptos during the same period, while imagining that the federal government through the FDIC will insure your fiat and cryptos on deposit on the platform.

No, these regulators wait until the creature crashed, and then in due course, when customers are already on the hook and can’t get their funds out, they’ll crack down with a cease and desist order, when in fact the company it has already gone out of business, and it is up to a bankruptcy judge to decide what, if anything, the company is going to do next.

It would be a total hoot if regulators actually stepped in to protect the people of these types of teams and their founders and executives and all the enablers that made DeFi possible. But that’s not going to happen. People are going to have to learn the hard way. And after they learned the hard way and got clean, the regulators come in with cease and desist orders, then brag about it so everyone knows how tough they are.

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