April 19, 2024
CFTC Files Complaint Against Former Voyager Digital CEO for Deceptive Practices
Policy & Regulation

CFTC Files Complaint Against Former Voyager Digital CEO for Deceptive Practices

The Commodities and Futures Trading Commission (CFTC) filed a complaint against Stephen Ehrlich, the former CEO of the now-defunct cryptocurrency lender Voyager Digital, on Thursday for deceiving the platform’s users about the security of their holdings.

The creator is charged with fraud and registration violations in connection with the operation of an “unregistered commodity pool”—a label the CFTC believes many cryptocurrencies, including Bitcoin (BTC), fall under.

“Ehrlich and Voyager falsely touted the Voyager platform as a “haven” to earn high-yield returns to induce customers to purchase and store digital asset commodities,” wrote the CFTC in a statement on Thursday.

The government now demands restitution, disgorgement, and civil monetary penalties in addition to permanent registration and trading prohibitions on Ehrlich. According to the CFTC, Voyager owed its American clients and creditors $1.7 billion when it filed for bankruptcy in July.

The bankruptcy court for Voyager gave the business permission to pay its creditors $1.3 billion in May.

The Federal Trade Commission (FTC) filed charges against Ehrlich on Thursday for making similar misleading statements as well as for fraudulently representing that client accounts were FDIC-insured.

Voyager offered consumers rates of up to 12% on their assets before going out of business last summer, and then transferred their funds to “high-risk third parties.”

The CFTC claims that at the beginning of 2022, Voyager transferred $650 million in pooled client assets to an unidentified hedge fund on an unsecured basis, functioning as a “commodity pool operator (CPO) without the required CFTC registration.”

“Ehrlich and Voyager… took shockingly reckless risks with their customers’ assets, leading to Voyager’s bankruptcy and huge customer losses,” stated Director of Enforcement Ian McGinley in a statement.

The accusations come after a flurry of previous enforcement proceedings by US authorities against rival crypto businesses since last year, when collapses including Celsius, Voyager, and BlockFi cost institutional and retail investors billions of dollars.

Digital currency exchanges like FTX and Binance.US once had intentions to acquire Voyager, but both ultimately failed. Since the previous exchange has failed, the CFTC and other parties have filed litigation against both parties for engaging in illicit commodity trading activities.

Image: Freepik

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