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FDIC issues cease and desist letters to five crypto companies, demanding they stop making 'misleading' claims

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(Kitco News) - The Federal Deposit Insurance Corporation (FDIC) revealed on Friday that it issued five cease and desist letters to crypto-related companies, including FTX US, demanding that they immediately stop “making false and misleading statements about FDIC deposit insurance and take immediate corrective action to address these false or misleading statements.”

FDIC deposit insurance protects customers in the event of the failure of an FDIC-insured bank.

According to the announcement, the letters were sent to “five companies and their officers, directors, and employees” after evidence collected by the agency showed that “each of these companies made false representations—including on their websites and social media accounts—stating or suggesting that certain crypto-related products are FDIC-insured or that stocks held in brokerage accounts are FDIC-insured.”

One company highlighted in the press release allegedly “registered a domain name that suggests affiliation with or endorsement by the FDIC,” which the agency claims is “false and misleading.”

The Federal Deposit Insurance Act (FDI Act) strictly prohibits any person or entity from implying that an uninsured product is backed by FDIC insurance. Knowingly misrepresenting the level of deposit insurance is also forbidden.

“The FDI Act further prohibits companies from implying that their products are FDIC-insured by using “FDIC” in the company’s name, advertisements, or other documents,” the agency said.

Based on the letters attached to the announcement from the FDIC, the five entities that received warnings include Cryptonews.com, Cryptosec.info, SmartAsset.com, FTX US and FDICCrypto.com.


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This move by the FDIC comes amid an uptick in enforcement actions from global regulators on the cryptocurrency front.

The recent collapse of several investing platforms, including Celsius and Voyager Digital, has prompted increased scrutiny from regulators. Many users of the now bankrupt Celsius platform claim they were misled to believe that their deposits were insured through Fireblocks, which proved not to be the case.

In July, Voyager was directly ordered by the FDIC to cease making claims that implied its customers' funds might have been insured by the FDIC. The agency has since issued a broader warning to the crypto ecosystem, clarifying that FDIC protections extend to banks but not to crypto companies that have bank accounts.

 

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