CFTC Commissioner Launches Scathing Attack On Voyager Digital

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A Commodity Futures Buying and selling Fee (CFTC) commissioner has slammed Voyager Digital, calling the corporate no higher than a home of playing cards.

Commissioner Kristen Johnson acknowledged that Voyager Digital made errors that led to the lack of billions of {dollars} in buyer funds. 

A Home Of Playing cards

Commissioner Kristen Johnson, in his assertion concerning the Commodity Futures and Buying and selling Fee’s prices towards Voyager Digital, stated the corporate was no higher than a home of playing cards, because of its monumental failures. These failures, Commissioner Johnson famous, led to the lack of billions in buyer funds. The assertion additionally accused Voyager of indulging in deceptive practices, ignoring warnings, and conducting bare-bones due diligence. 

“Opposite to that marketed picture, Voyager and Ehrlich are alleged to have accepted loans valued at a whole lot of thousands and thousands of {dollars} price of buyer belongings to quite a few third events that, for instance, made outstanding disclaimers that investing with them had a “excessive diploma of threat” that might lead to traders dropping all their cash.”

The assertion additional added, 

“Voyager is alleged to have carried out inadequate due diligence on these counterparties and to have wrongly decided that they had been of low threat regardless of proof on the contrary. When one of many counterparties defaulted on repaying a Voyager mortgage of roughly $650 million of buyer funds, Ehrlich hid from prospects Voyager’s precarious monetary place, omitted point out of the default, and continued to solicit deposits from new and present prospects.”

The commissioner additionally acknowledged that Voyager turned a blind eye to what its subsidiary funding corporations had been doing with buyer funds. 

“It’s astounding that Voyager didn’t exert strain on the corporations the place it invested its prospects’ belongings. As an alternative of demanding that funding corporations that acquired buyer belongings provide larger ranges of transparency, Voyager shirked the long-established expectations for custodians and easily dispatched buyer funds with little effort to protect the identical.”

Former Voyager CEO Charged By US Regulators 

The feedback got here after the Commodity Futures Buying and selling Fee (CFTC) and the Federal Commerce Fee filed separate lawsuits towards the previous CEO of Voyager, Stephen Ehrlich, on the twelfth of October. The CFTC lawsuit alleges that Ehrlich and Voyager carried out fraud and registration failures over its platform and unregistered commodity pool. 

“Ehrlich and Voyager lied to Voyager prospects. Whereas representing they might deal with prospects’ digital asset commodities safely and responsibly, behind the scenes, they took shockingly reckless dangers with their prospects’ belongings, resulting in Voyager’s chapter and big buyer losses.”

In the meantime, the Federal Commerce Fee reached a proposed settlement that banned Voyager from providing, advertising, or selling any product that might facilitate deposits or exchanges or be used to take a position or withdraw belongings, in line with a press release launched on the twelfth of October. 

Voyager and its associates agreed to a judgment of $1.65 billion, all of which might go in the direction of repaying affected prospects in the course of the chapter proceedings. The director of the FTC’s Bureau of Client Safety, Samuel Levine, acknowledged that the FTC’s motion ought to remind corporations and people to not make free claims about FDIC insurance coverage. 

CFTC To Proceed Pursuing Companies Misusing Buyer Funds 

In a separate assertion issued on the twelfth of October, CFTC Commissioner Caroline Pham asserted that the regulator will proceed to pursue motion towards crypto corporations that misuse buyer funds. 

“The CFTC continues to aggressively pursue alleged fraud in crypto belongings and relentlessly uphold its mission to guard the retail public. There’s a important distinction between managing investor cash for the aim of buying and selling derivatives and taking deposits and offering loans to others. With out financing and client credit score, our economic system would grind to a halt.”

Nevertheless, Pham believes that the CFTC could have overreached its authority in deciphering what constitutes a commodity pool operator. 

“Nevertheless, I warning that the CFTC’s interpretation of a commodity pool operator on this enforcement motion would appear to incorporate commonplace lending exercise—like taking deposits and offering loans. Such an interpretation is an overreach past our statutory authority and would disrupt well-established authorized and regulatory frameworks for lending to establishments and client finance.”

Pham has additionally referred to as on the CFTC to ascertain a cryptocurrency regulatory pilot program that addresses the dangers confronted by retail traders.

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