Sam Bankman-Fried, founder and chief executive officer of FTX Cryptocurrency Derivatives Exchange, speaks during an interview on the Bloomberg Wealth episode with David Rubenstein in New York, USA, Wednesday, August 17, 2022.
Jeenah Wulan | Bloomberg Getty Images
FTX, the crypto exchange controlled by Sam Bankman-Fried, received a cease-and-desist warning on Friday from the Federal Deposit Insurance Corporation, telling the company to stop “misleading” consumers about the insurance status of its funds.
FDIC issued a letter to five crypto companies, including FTX US. Unlike deposits held in US banks, cryptocurrencies deposited with brokers are not protected by the government.
“Based on evidence collected by the FDIC, each of these companies made false representations – including on their websites and social media accounts – stating or suggesting that crypto-related products were FDIC insured or that stocks held in brokerage accounts were FDIC insured,” the regulator said. in a press release.
In addition to FTX US, the FDIC informed Cryptonews.com, Cryptosec.info, SmartAsset.com and FDICCrypto.com. The FDIC said the company must “take immediate corrective action to address these false or misleading statements.” The agency knowingly misrepresents or states that a product that is not insured as FDIC insured is prohibited by the Federal Deposit Insurance Act.
In a special letter to FTX, the FDIC said that on July 20, Brett Harrisonpresident of FTX.US, issued a tweet stating that direct deposits from employers are held in FDIC-insured accounts in the user’s name.
Harrison tweeted on Friday that he deleted the post and did not mean to indicate that the crypto assets stored in FTX are insured by the FDIC, but that “USD deposits of employers are held in insured banks.”
“We really do not want to mislead anyone, and we are not suggesting that FTX US itself, or any crypto/non-fiat assets, benefit from FDIC insurance,” Harrison wrote.
FTX.US is a US cryptocurrency exchange owned by FTX, which is based in the Bahamas and has focused heavily on building its business outside of the US.
The FDIC also said the website for SmartAsset and CryptoSec identifies FTX as an “‘FDIC-insured’ cryptocurrency exchange.”