US Regulators Take Legal Action Against Former Voyager Digital CEO for Fraud

U.S. regulators have filed legal actions against Steve Ehrlich, the former CEO and co-founder of Voyager Digital, accusing him of fraudulent activities and deliberately misleading customers about the level of government protections provided to them.

The Commodity Futures Trading Commission (CFTC) and the Federal Trade Commission (FTC) jointly announced their actions against Ehrlich on Thursday. The CFTC expanded its complaint to include Circle’s USDC stablecoin and bitcoin as commodities.

Ehrlich responded to the allegations, stating: “The CFTC’s complaint alleges that I misled customers about the financial stability of the company and conducted business without the necessary registrations.”

The FTC claims that Ehrlich falsely claimed that customers’ funds were protected by the Federal Deposit Insurance Corp.

“Ehrlich and Voyager lied to Voyager customers,” said Ian McGinley, the CFTC’s enforcement director, highlighting the risky practices that led to Voyager’s bankruptcy and significant customer losses.

The CFTC’s lawsuit aims to seek restitution, penalties, and potential industry bans for Ehrlich. Voyager Digital filed for bankruptcy in July 2022.

Caroline Pham, one of the CFTC’s commissioners, expressed disagreement with the agency’s stance, arguing that the interpretation to register Voyager as a commodity pool operator is misguided. Pham stated, “Such an interpretation is an overreach beyond our statutory authority and would disrupt well-established legal and regulatory frameworks for lending to institutions and consumer finance.”

The CFTC clarified its position on certain digital assets through this legal action, classifying them as commodities. The agency mentioned that BTC, USDC, and other digital assets fall under the category of commodities, aligning with previous declarations.

The FTC had previously reached a settlement with Voyager Digital, permanently prohibiting them from managing customers’ assets and imposing a suspended $1.65 billion judgment. This judgment allows the firm to conduct its liquidation process to reimburse customers.

Samuel Levine, the director of the FTC’s Bureau of Consumer Protection, emphasized the importance of honest representations regarding FDIC insurance, stating, “This action reminds companies and individuals: Don’t play fast and loose with claims about FDIC insurance.”

The legal issues surrounding Voyager Digital started with its collapse in July 2022. The crypto lender initially attempted to secure a deal with FTX, which ultimately failed. Subsequent negotiations with Binance also fell through. Former Voyager customers now face the grim reality of potentially recovering no more than 36% of their assets, according to estimates.

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