The Federal Deposit Insurance Corp., which protects customers in the event of certain types of bank failures, is looking into how the bankrupt digital-asset firm Voyager Digital marketed itself to customers, a spokesperson for the agency said.
Voyager, the latest casualty of the turmoil in the crypto markets, has publicly said that any U.S. dollars deposited with the firm are covered by FDIC insurance, thanks to its partnership with Metropolitan Commercial Bank. Wording posted in 2019 on a company web page stated that this protection would take effect in the “rare event your USD funds are compromised due to the company or our banking partner’s failure,” according to the Wayback Machine, which keeps an archive of internet content.
Gabby Jones/Photographer: Gabby Jones/Bloomb
But that wording was since modified and as of Thursday removes the explicit references to company or bank failures, instead saying, “in the rare event your USD funds are compromised, you are guaranteed a full reimbursement (up to $250,000), so the cash you hold with Voyager is protected.” Meanwhile, Metropolitan Commercial Bank issued a statement recently informing Voyager customers that FDIC insurance coverage would only be offered if the bank itself failed and not in event of Voyager’s failure. Voyager declined to comment when asked about the FDIC probe or why it changed the language on its website.
The U.S. government has been increasingly concerned about companies making false advertisements to consumers about deposit insurance. The FDIC in May put out a final rule barring firms from making those kinds of misrepresentations or misusing the FDIC name or logo. Those that violate the rule face enforcement action, including penalties. At the same time, the Consumer Financial Protection Bureau issued a warning on the topic, saying the “issue has taken on renewed importance with the emergence of financial technologies — such as crypto-assets, including stablecoins.”
The FDIC spokesperson emphasized in an email Thursday that while Metropolitan Commercial Bank is FDIC-insured, Voyager is not. Therefore deposit insurance does not protect customers against Voyager’s default, bankruptcy, withdrawal freeze, or loss in value of products, the spokesperson said. The CFPB declined to comment. Voyager paused customer deposits and withdrawals last week and then filed for Chapter 11 bankruptcy late Tuesday.
Social media has been abuzz with confused and frustrated customers who fear they’ll never get reimbursed for their crypto and cash holdings. Some said they felt misled by the company’s prior statements about FDIC insurance.
Normally such insurance would cover up to $250,000 in losses per depositor — sometimes more if a customer holds several different types of accounts.
The fine print in Voyager’s user agreement was clear about FDIC protection only applying if the partner bank failed but that’s something average retail investors often overlook, said Frances Coppola, a financial blogger who has written about the firm’s issues.
Some of Voyager’s marketing materials were misleading, even if it’s unclear whether the firm did anything legally wrong, she said. “It’s mis-selling.”
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