Sam Bankman-Fried’s FTX US and four other companies were issued the cease-and-desist letters from the Federal Deposit Insurance Corporation (FDIC). The other companies are Cryptosec.info, Cryptonews.com,FDICCrypto.com, and SmartAsset.com. They have been ordered to stop making false and misleading statements about FDIC deposit insurance.
In a letter to FTX US president Brett Harrison, FDIC said the crypto exchange had tweeted on July 20 that direct deposits from employees to FTX US are stored in individually FDIC-insured bank accounts in the users’ names. The tweet said stocks are held in FDIC-insured and SIPC-insured brokerage accounts. The agency highlighted that FTX US is not FDIC-insured and that the FDIC does not insure any brokerage accounts, and FDIC insurance does not cover stocks or cryptocurrency.
The statement read that FDIC only insures deposits held in insured banks and savings associations. FDIC insurance only safeguards against losses caused by the failure of insured institutions. As such, it said the statements made by FTX US are likely to mislead and potentially harm consumers.
Harrison, in response, said he had deleted the July 20 tweet. He pointed out that it was written in response to questions regarding whether direct USD deposits from employers were held at insured banks. The president said FTX US didn’t mean to mislead anyone and didn’t suggest that the crypto exchange itself, or that crypto/non-fiat assets, benefit from FDIC insurance. Harrison hopes this provides clarity on the company’s intentions.
FDIC highlighted that Cryptonews.com published reviews of cryptocurrency exchanges stating that Coinbase, eToro US, Crypto.com, and Gemini were insured by the agency. The regulator, in regards to CryptoSec.com and SmartAsset.com, noted the pages on their respective websites that include lists of FDIC-insured cryptocurrency exchanges.