Internet ‘neobank’ ordered to stop saying it has federal bank deposit insurance coverage

A so-called “neobank” which says it provides access to the U.S. banking system has been ordered to stop making phony representations that its customers cryptocurrency is covered by federal bank deposit insurance, the agency that does, in fact, provide that coverage said late Monday.

In a release, the Federal Deposit Insurance Corporation (FDIC) said it issued a letter demanding that Utoppia Inc., San Francisco, and certain of its officers, “cease and desist from making false and misleading statements about FDIC deposit insurance and take immediate corrective action to address these false or misleading statements.”

“Based upon evidence collected by the FDIC, Utoppia and/or its officers made false representations in English and in Spanish, stating or suggesting that Utoppia is FDIC–insured, that FDIC insurance will protect customers’ cryptocurrency, and did not clearly and conspicuously identify an insured deposit institution for placement of deposits,” the FDIC wrote.

“These representations and material omissions are false and misleading,” the agency said.

The agency has been watching carefully over the past year or so those organizations that offer crypto investment and other accounts and whether or not they make claim to FDIC insurance coverage.

FDIC Board Chairman Martin Gruenberg, in a statement, indicated that there has been an increase in misrepresentations of coverage. “These practices not only harm those who are targeted with the false promise of deposit insurance, but, if left unchecked, could also undermine confidence in the FDIC, FDIC-insured banks, and the U.S. banking system,” Gruenberg said.

FDIC Demands Utoppia Inc. and Its Officers Cease Making False or Misleading Representations about Deposit Insurance in English and Spanish