In the latest turn of events, the Federal Deposit Insurance Corporation (FDIC) has issued cease and desist letters to five companies for making false and misleading statements and requested them to take immediate corrective action. The five companies are namely: Cryptonews.com, Cryptosec.info, SmartAsset.com, FTX US, and FDICCrypto.com.
The FDIC letters, dated August 18, 2022, made reference to potential violations of section 18(a)(4) of the Federal Deposit Insurance Act which states that:
“No person may represent or imply that any deposit liability, obligation, certificate, or share is insured or guaranteed by the Corporation, if such deposit liability, obligation, certificate, or share is not insured or guaranteed by the Corporation–
(i) by using the terms “Federal Deposit”, “Federal Deposit Insurance”, “Federal Deposit Insurance Corporation”, any combination of such terms, or the abbreviation “FDIC” as part of the business name or firm name of any person, including any corporation, partnership, business trust, association, or other business entity; or
(ii) by using such terms or any other terms, sign, or symbol as part of an advertisement, solicitation, or other document”.
The FDIC cited several examples in the respective letters to the five companies where they had made false or misleading representations on their websites and social media accounts. In a specific case, one of the companies had registered a domain name that gave inference to endorsement by the FDIC.
The FDIC release stated that: “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”.
In July 2022, the FDIC and the Federal Reserve issued a joint letter demanding that Voyager Digital cease and desist from making false or misleading representations of its deposit insurance status. Voyager Digital was requested to remove statements, representations, or references suggesting that the FDIC insured it or that its customers would receive FDIC insurance coverage.
The FDIC continues to advise the public and other stakeholders in its mandate to maintain stability and public confidence in the US financial system.