The Sam Bankman-owned cryptocurrency exchange FTX was given a cease-and-desist order by the Federal Deposit Insurance Corporation (FDIC) for making “false and misleading assertions” that claimed the FDIC was insuring its assets. The FDIC does not provide insurance for stocks or cryptocurrencies; rather,
it only provides protection for funds held in bank accounts. The FDIC reports FTX President Brett Harrison as stating in a since-deleted tweet that “direct payments from employers to FTX US are stored in individually FDIC-insured bank accounts in the users’ names.
” Stocks are stored in SIPC [Security Investor Protection Corporation] and FDIC-insured brokerage accounts, the questioned tweet further adds. The FDIC claims that this misrepresents FTX and the funds that clients invest are FDIC-insured. really not.
Users have also brought attention to another tweet from Harrison that is probably untrue, in which he asserts that, despite not being referenced in the FDIC’s letter, “cash associated with brokerage accounts is processed into FDIC-insured accounts” at FTX’s “partner bank.
“FTX “didn’t suggest that FTX US itself, or that crypto/non-fiat assets benefit from FDIC insurance,” according to Harrison’s response to the FDIC’s letter, and FTX “really didn’t wish to mislead anyone,
” he said. Bankman-Fried, the CEO and creator of FTX, added that although “FTX does not have FDIC protection,” the banks it deals with have. In order to better protect its customers,
the business may “explore alternative techniques whereby individual accounts using direct deposit may, in the future, be utilized,” according to a statement.
Bankman-Fried also brings up FTX.I’d be more than happy to work with the FDIC on that. Businesses are not allowed to “implicate that their goods are FDIC-insured by utilizing the term ‘FDIC’ in the company’s name, advertisements, or other documents,” according to the FDIC.
FTX has been given 15 days by the FDIC to demonstrate that any claimed misrepresentations have been removed or corrected. Along with FTX, the FDIC also sent cease-and-desistletterstofourmorecompanies:Cryptonews.com, Cryptosec.info, and SmartAsset.
com, and FDICCrypto.com.The FDIC declined to comment more than what was said in its letter, and FTX did not immediately respond to The Verge’s request for comment.FTX has started offering options for trading both traditional equities and cryptocurrency, much like Robinhood.
Bitcoin millionaire Bankman-Fried disclosed a 7.6% increase in May. He reportedly has stock in Robinhood and is thinking about acquiring the trading platform.
FTX and Bankman-crypto Fried’s trading firm Alameda Research have managed to thrive despite the so-called “crypto winter” driving a lot of cryptocurrency firms into bankruptcy.
After providing lines of credit to several struggling crypto enterprises in order to help them survive the unpredictable market, Bankman-Fried told Reuters he has “a few billion” more for more rescues.
According to documents obtained by CNBC, FTX made $1.02 billion in sales in 2021 and $270 million in the first quarter of 2022.