FDIC warns FTX US over misleading claims on crypto insurance

• FDIC sent the cease and desist letter to five companies, including FTX US and mentioned alleged misleading tweets from FTX US president Brett Harrison.
• The agency wants the crypto company to ensure any misleading details are removed and compliance confirmed in writing within fifteen days.

The Federal Deposit Insurance Corporation (FDIC), a US government agency that offers deposit insurance to customers of insured banks, has warned crypto exchange FTX US over what it calls “false and misleading statements about FDIC deposit insurance.”

The agency’s cease and desist letter to the US-based crypto platform comes after the FDIC sent a similar warning to FTX US president Brett Harrison.

And other than the exchange, other four crypto-related companies also received letters from the US watchdog, according to details shared in a press release on Friday. 

The others warned are Cryptonews.com, Cryptosec.info, SmartAsset.com and FDICCrypto.com.

FTX US is not FDIC-insured 

FDIC says evidence shows the listed firms misrepresented or offered false claims “including on their websites and social media accounts,” about the insurance by FDIC of some crypto–related products or stocks.

“In one case, a company offering a so–called cryptocurrency also registered a domain name that suggests affiliation with or endorsement by the FDIC. These representations are false and misleading,” the agency warned,

On Thursday, the FDIC had written to FTX US about the issue, and highlighted a tweet Harrison shared on 20 July. In the tweet, the FTX US boss had noted that “direct deposits from employers to FTX US are stored in individually FDIC-insured bank accounts in the users’ names.”

The agency also flagged the claim that “stocks are held in FDIC-insured and SIPC-insured brokerage accounts.”

Similarly, FTX US had been described as being FDIC-insured on two of the above websites. The regulatory body says such allegations are likely to mislead and/or harm consumers. The agency said FTX US is not FDIC-insured.

In a tweet acknowledging the FDIC warning, Harrison said:

“Per the FDIC’s instruction I deleted the tweet. The tweet was written in response to questions raised on twitter regarding whether direct USD deposits from employers were held at insured banks (i.e. Evolve Bank).”

In its cease and desist demand, the FDIC asked FTX US to remove all reference to the deposit insurance claims shown to be false.

Also, other than ensuring this is not repeated at any other time or form, the exchange has to within fifteen days of receiving the letter, write to the agency to confirm compliance.