The U.S. regulator Federal Deposit Insurance Corporation (FDIC) issued a letter against Sam Bankman-Fried’s FTX US demanding a “cease and desist” from making claims that its customers’ funds were protected by the government.
Apart from FTX, the FDIC also issued cease-and-desist orders to four other firms: SmartAsset, FDICCrypto, Cryptonews, and Cryptosec for deceiving the general public about several cryptocurrency-related products having FDIC insurance.
The FDIC claimed that Brett Harrison, the head of FTX’s U.S. operations, made false claims in a tweet that funds held at and stocks bought through FTX were FDIC insured. As a result, the FDIC ordered the company to delete any false statements from its websites and social media accounts.
In July, Harrison tweeted that direct deposits from employers to FTX are “stored in individually FDIC-insured bank accounts” and that stocks purchased via FTX US “are held in FDIC-insured” brokerage accounts.
Following FDIC’s response, Harrison tweeted “Per the FDIC’s instruction I deleted the tweet. The tweet was written in response to questions raised on Twitter regarding whether direct USD deposits from employers were held at insured banks (i.e. Evolve Bank).”
FTX is asked to remove all “statements, representations, or references” that suggest that FTX US is FDIC-insured, any FTX US brokerage accounts are FDIC-insured, and any funds held in cryptocurrency or other financial products are or can be protected by FDIC insurance.
Also Read: Crypto Company Failures Aren’t FDIC Insured
The FDIC also demanded to remove insurance-related claims from FTX’s websites, social media accounts, mobile apps, online outlets, and “all forms of marketing, advertising, or consumer-facing materials and communications.”
The regulators are demanding a written confirmation within fifteen business days of receiving this letter that FTX US has fully complied with the demands outlined above.
This confirmation must include information on all actions taken to comply with this letter, such as those taken to find and track down any inaccuracies and the extent of the removal of such content.
“Failure to respond to this letter may result in the FDIC taking appropriate action as authorized by the Federal Deposit Insurance Act and any other applicable law or regulation,” the letter states.
FTX CEO Sam Bankman-Fried later took it on Twitter to clarify the matter saying “FTX does not have FDIC insurance (and we’ve never said so on the website etc.); banks we work with do. We never meant otherwise, and apologize if anyone misinterpreted it.”
