The FDIC has issued cease and desist (C&D) letters to five companies and their officers, directors and employees for making crypto-related false or misleading representations about deposit insurance and to take immediate action to address the statements. The action taken on August 19, 2022 comes after several government agencies issued warnings about the marketing of crypto.
In May, the Consumer Financial Protection Bureau (CFPB) and the Federal Deposit Insurance Corporation (FDIC) warned cryptocurrency companies and fintechs to stop misrepresenting that cryptocurrencies stored at brokerages are FDIC-insured and government-protected.
According to the FDIC:
- “Based on evidence collected by the FDIC, each of these companies made false representations — including on their websites and social media accounts — suggesting or implying that certain crypto-related products are FDIC-insured or that stocks held in brokerage accounts are FDIC-insured .”
- “In one case, a company offering a so-called cryptocurrency also registered a domain name that suggests affiliation with or endorsement by the FDIC.”
- “The representations are false and misleading.”
At least two of the companies receiving the C&D operate websites that each identified one of the other companies receiving a C&D as “FDIC insured.”
The letters read “failure to respond to this letter may result in the FDIC taking appropriate action as authorized under the Federal Deposit Insurance Act and any other applicable law or regulation.”
The Federal Deposit Insurance Act (FDI Act) prohibits any person from representing or implying that an uninsured product is FDIC insured, or from knowingly misrepresenting the extent and manner of deposit insurance. 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 FDIC is authorized by the FDI Act to enforce this prohibition against any person.
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