FDIC probes Voyager Digital

The US Federal Deposit Insurance Corporation (FDIC) is examining Voyager Digital’s activities. According to the agency, the cryptocurrency broker misled users by claiming that their assets were protected by the agency’s program, Bloomberg reports.

On July 5, Voyager Digital filed for bankruptcy in a New York court. The company’s liabilities are estimated at between $1 billion and $10 billion, with roughly 100,000 customers.

A similar filing under Chapter 11 of the U.S. Bankruptcy Code was filed by subsidiary entities — Voyager Digital Holdings Inc and Voyager Digital LLC. The company expects that the financial restructuring process will “maximize value for all stakeholders.”

Voyager holds around $1.3 billion on the platform, more than $350 million in an account at Metropolitan Commercial Bank, and claims against Three Arrows Capital totaling more than $650 million. In addition, the company “has about $110 million in cash and proprietary cryptocurrency assets.”

The broker had stated that clients’ assets fall under FDIC insurance thanks to its partnership with Metropolitan Commercial Bank.

“This means that, in rare cases, if our dollar reserves are compromised, you are guaranteed full reimbursement (up to $250,000), so cash in Voyager accounts is protected,” according to the company’s post published December 18, 2019.

However, this is a modified statement. According to the Wayback Machine snapshot of the original page, the formulation read:

“[…] in rare cases, when our dollar reserves are compromised due to a fault by the company or our banking partner …”.

On the Metropolitan Commercial Bank site, it says that the bank operates an “omnibus account,” intended for Voyager clients. Assets in that account are FDIC-insured, but coverage is available “solely to protect the bank from bankruptcy” of the financial institution:

“FDIC insurance does not protect against the collapse of Voyager, the actions or inactions of the company or its employees, as well as losses tied to declines in the prices of cryptocurrencies or other assets.”

In a briefing with Bloomberg, an FDIC spokesperson stressed that Metropolitan Commercial Bank is insured by the agency, but Voyager Digital is not. He said the agency’s program does not shield clients of the broker from default, bankruptcy, or the blocking of funds.

Earlier, provided the cryptocurrency broker a loan of 200 million USDC and opened a rolling credit line of 15,000 BTC.

Earlier, Changpeng Zhao criticized the deal and said that he would never have agreed to such an arrangement.

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