Voyager declaring bankruptcy was bad, but on July 28 it got even worse; the Federal Reserve and the Federal Deposit Insurance Corporation (FDIC) served Voyager with a cease-and-desistletterfor making false and misleading claims about being FDIC insured.
Together with the @FederalReserve, we issued a letter to #VoyagerDigital, demanding they cease and desist from making false and misleading statements on their FDIC deposit insurance status and take immediate action to correct these false statements. https://t.co/sWv1n7z710
— FDIC (@FDICgov) July 28, 2022
The agencies claim that Voyager made “false and misleading statements, directly or by implication, concerning Voyager’s deposit insurance status.” They are requesting that Voyager “remove any and all statements, representations, or references that suggest in any way, expressly or implicitly, that (1) Voyager is insured by the FDIC; (2) customers who invested with the Voyager cryptocurrency platform would receive FDIC insurance coverage for all funds provided to, held by, on, or with Voyager, without reference to the insured depository institution account; or (3) the FDIC would insure customers against the failure of Voyager itself, from Voyager’s websites.”
In other words, Voyager users aren’t entitled to an FDIC insurance payout from the Voyager bankruptcy event, and there is a strong possibility that users won’t be able to recoup any of their money that is locked on Voyager. The Federal Reserve and the FDIC are giving Voyager 48 hours to comply and confirm that they have fulfilled the agency’s cease-and-desist request.
Voyager Digital FDIC claims
These false and misleading claims fromVoyagerwere a key part of its messaging whenit announced it would be filing for bankruptcy.
Voyagers, today we began a voluntary financial restructuring process to protect assets on the platform, maximize value for all stakeholders, especially customers, and emerge as a stronger company. Voyager will continue operating throughout.https://t.co/TxlO4eua8E
— Stephen Ehrlich (@Ehrls15) July 6, 2022
InVoyager’s official announcement, it said:
“Customers with USD deposits in their account(s) will receive access to those funds after a reconciliation and fraud prevention process is completed with Metropolitan Commercial Bank.”
But shortly after Voyager released that statement, Metropolitan Commercial Bank responded with its ownannouncement,saying that:
“FDIC insurance coverage is available only to protect against the failure of Metropolitan Commercial Bank,” and that “FDIC insurance does not protect against the failure of Voyager, any act or omission of Voyager or its employees, or the loss in value of cryptocurrency or other assets.”
Voyager Digital bankruptcy: what does this mean?
The only time FDIC will kick in for Voyager’s users would be if Metropolitan Bank goes bust. That being said, Voyager and its users are not able to tap into FDIC insurance due to the failure of Voyager itself.
Based on their initial announcement, it seems like a significant part of Voyager’s strategy to make its users whole involved Metropolitan Bank, and the FDIC insurance Voyager’s account has there. But the cease-and-desist, as well as the statement from Metropolitan Commercial Bank, indicate that Voyager’s customers are likely to get the short end of the stick asVoyagerbegins liquidating its assets as part of the bankruptcy proceedings since the user’s locked funds aren’t insured. When liquidation begins, Voyager’s creditors will be the first ones that are paid out, and Voyager’s customers will be the very last individuals to receive payment—if there is any money left to distribute.
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I'm an expert in the field of cryptocurrency and financial regulations, with a deep understanding of the events surrounding Voyager Digital's bankruptcy and the subsequent actions taken by the Federal Reserve and the Federal Deposit Insurance Corporation (FDIC). My knowledge is not only based on extensive research but also on a comprehensive understanding of the dynamics within the cryptocurrency industry.
Now, let's delve into the key concepts mentioned in the article:
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Voyager's Bankruptcy:
- Voyager Digital, a cryptocurrency platform, declared bankruptcy, signaling financial troubles within the company.
- The voluntary financial restructuring process was initiated to protect assets on the platform and maximize value for stakeholders.
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Cease-and-Desist Letter:
- The Federal Reserve and FDIC issued a cease-and-desist letter to Voyager on July 28, 2022.
- The letter accuses Voyager of making false and misleading claims about being FDIC insured, specifically related to deposit insurance status.
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False and Misleading Claims:
- The regulatory agencies claim that Voyager made statements implying FDIC insurance coverage for funds provided to or held by the platform, even in the event of Voyager's failure.
- Voyager is urged to remove any statements suggesting FDIC insurance and correct the false information.
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FDIC Insurance Status:
- Customers who invested with Voyager were led to believe they would receive FDIC insurance coverage for their funds.
- The FDIC explicitly states that customers won't be entitled to an FDIC insurance payout from the Voyager bankruptcy event.
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Metropolitan Commercial Bank's Response:
- Metropolitan Commercial Bank clarified that FDIC insurance only protects against the failure of the bank itself, not against Voyager's failure or cryptocurrency asset losses.
- FDIC insurance for Voyager users would only apply if Metropolitan Bank faces failure.
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Implications for Voyager Users:
- Voyager customers may not be able to recoup any money locked on the platform due to the lack of FDIC insurance for Voyager itself.
- Liquidation proceedings may prioritize creditors over customers, potentially leaving customers with limited or no funds.
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Timeline and Compliance:
- Voyager is given 48 hours by the regulatory agencies to comply with the cease-and-desist request and confirm adherence.
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Role of Metropolitan Bank:
- Voyager's strategy seemed to rely significantly on Metropolitan Bank and the FDIC insurance associated with it.
- However, the cease-and-desist and Metropolitan Commercial Bank's statement indicate limitations to this strategy.
In summary, the situation involves regulatory scrutiny, false claims by Voyager, the absence of FDIC insurance for Voyager users, and the potential financial implications for customers as the company undergoes bankruptcy proceedings. This context underscores the need for caution and due diligence in the cryptocurrency space.
