The United States Commodity Futures Trading Commission (CFTC) and Federal Trade Commission (FTC) have taken legal action against Stephen Ehrlich, the former CEO of crypto lending firm Voyager Digital. Both agencies have filed parallel lawsuits against Ehrlich, accusing him and Voyager of fraud and “registration failures” related to the platform and its unregistered commodity pool.
The CFTC announced on October 12th that it had filed a lawsuit in the U.S. District Court for the Southern District of New York seeking restitution, disgorgement, civil monetary penalties, and permanent trading and registration bans against Ehrlich and Voyager. The commission alleges that Ehrlich and Voyager deceived their customers by falsely promising to handle their digital asset commodities safely and responsibly. Instead, they engaged in reckless risk-taking that ultimately led to Voyager’s bankruptcy and significant customer losses. Even as their business collapsed, Ehrlich and Voyager continued to lie to their customers, concealing the true financial health of the company.
In parallel, the FTC revealed that it had reached a settlement with Voyager that will permanently prohibit the company from handling consumers’ assets. The FTC also filed a lawsuit against Ehrlich in the same New York court, accusing him of falsely claiming that Voyager accounts were insured by the Federal Deposit Insurance Corporation (FDIC) and were “safe”. As part of the proposed settlement, Voyager and its affiliates will pay a $1.65 billion fee.
The FTC’s complaint primarily focuses on Voyager’s claim that USD Coin (USDC) deposits were insured by the FDIC. Ehrlich is accused of transferring millions of dollars from Voyager to his wife, Francine, who is named as a relief defendant in the FTC case. Both lawsuits revolve around alleged fraudulent statements made by Ehrlich regarding Voyager’s financial health in 2022.
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It is worth noting that Voyager filed for Chapter 11 bankruptcy protection in July 2022 during the crypto market downturn, and the case is still ongoing. In May, the bankruptcy court approved Voyager’s repayment plan for customers, allowing them to recover a portion of their claims.
The legal actions against Ehrlich and Voyager highlight the increased regulatory scrutiny faced by the cryptocurrency industry. The CFTC and FTC have been actively pursuing cases against crypto firms and their executives, including notable figures like former Celsius CEO Alex Mashinsky and former FTX CEO Sam Bankman-Fried. Bankman-Fried’s first criminal trial began on October 3rd. In July, Binance and its CEO, Changpeng Zhao, sought the dismissal of a lawsuit filed by the CFTC, which alleged that the company offered unregistered derivatives products.
These regulatory actions illustrate the commitment of U.S. enforcement agencies to crack down on crypto-related crimes and fraudulent activities within the industry. As the cryptocurrency market continues to grow, it is expected that regulatory oversight will further intensify to protect consumers and maintain market integrity.
In conclusion, the CFTC and FTC have filed lawsuits against Stephen Ehrlich and Voyager Digital, accusing them of fraud and registration failures. Both agencies seek to hold Ehrlich accountable for allegedly deceiving customers and causing significant financial losses. The lawsuits demonstrate the increased regulatory scrutiny faced by the crypto industry and the authorities’ determination to root out fraudulent activities.
