FDIC orders crypto exchange FTX to stop ‘false and misleading’ claims that crypto funds are insured by the US government
Crypto exchange FTX found itself in hot water over a now-deleted tweet where it claimed that crypto funds at the company are insured by the US government. On Friday, the Federal Deposit Insurance Corporation (FDIC), one of the US bank regulators, ordered FTX US to stop what it called “false and misleading” claims the company made to the public.
The FDIC said that in July, FTX head of U.S. operations Brett Harrison posted a tweet that contained misleading claims that funds held at and stocks purchased through FTX were FDIC insured.
In a July 20 tweet, which has since been deleted, Harrison stated that direct deposits from employers to the crypto exchange are “stored in individually FDIC-insured bank accounts” and that stocks purchased via FTX US “are held in FDIC-insured” brokerage accounts.
In a cease and desist letter sent to FTX US on Thursday, the FDIC said that Harrison’s statements implied that FDIC insurance was available for cryptocurrency and stock holdings and that the agency does not insure brokerage accounts.
“FTX US is not FDIC-insured, the FDIC does not insure any brokerage accounts, and FDIC insurance does not cover stocks or cryptocurrency,” the FDIC said in the letter.
It continued: “The FDIC only insures deposits held in insured banks and savings associations…and FDIC insurance only protects against losses caused by the failure of insured institutions. Accordingly, these statements are likely to mislead, and potentially harm consumers.”
FTX is not alone. The FDIC also warned four other crypto companies to stop making false and misleading statements about FDIC deposit insurance. In addition, the FDIC also said in its letter that FTX is also identified as an FDIC-insured crypto exchange on SmartAsset.com and CryptoSec.info
The FDIC gives FTX US fifteen business days to comply with the request.
FTX was founded in 2019 by 29-year-old MIT graduate Sam Bankman-Fried and his co-founder Gary Wang. The Bahamas-based crypto exchange FTX offers derivatives products like futures and options as well as spot trading. Once an unknown startup, FTX has become a key player in the crypto space, rivaling the likes of Coinbase and Binance.
Bankman-Fried, who currently resides in Hong Kong, is now worth at least $25 billion making him the richest person in crypto, according to Forbes. Sam graduated from the Massachusetts Institute of Technology in 2013 at the age of 21. He was skilled in math and loved to solve problems and give back to society.
With $2 billion in total funding since its inception three years ago, FTX has built up a war chest at a time when digital currency prices have sunk considerably. However, Bankman-Fried doesn’t think we’re entering a “long-term crypto winter.”ftx-harrison-letter