Five companies that offer or circulate information about crypto-related products were ordered in letters Wednesday to cease and desist from making false and misleading statements about federal bank deposit insurance and to take immediate corrective action, the Federal Deposit Insurance Corp. (FDIC) said Thursday.
The FDIC said the cease-and-desist (C&D) letters went to:
- FTX.US, and
- FDICCrypto.com (which redirects all visitors to chsserviceprovider.com).
One of the links identified by the FDIC’s letter Wednesday to SmartAsset.com was no longer working at the time this article was posted.
In Thursday’s announcement of C&D orders, the FDIC said that based on the evidence it collected, each of the firms 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. “In one case,” it said, apparently referring to the last of the firms noted above, “a company offering a so–called cryptocurrency also registered a domain name that suggests affiliation with or endorsement by the FDIC. These representations are false and misleading,” it said.
The agency, in its release, stated that the Federal Deposit Insurance Act (FDI Act) prohibits any person from representing or implying that an uninsured product is FDIC-insured or from knowingly misrepresenting the extent and manner of deposit insurance. The agency further noted that the act prohibits companies from implying that their products are FDIC-insured by using “FDIC” in the company’s name, advertisements, or other documents; and that the FDIC is authorized under the statute “to enforce this prohibition against any person.”
Amid an apparent, ongoing trend of firms asserting FDIC coverage for crypto, the FDIC last month issued an advisory to banks explaining that the agency expects them to be aware of how FDIC insurance operates; that they need need to assess, manage, and control risks arising from third-party relationships, including those with crypto companies; and that they should take appropriate action to address such misrepresentations.