CFTC Commissioner Kristin Johnson’s remarks followed lawsuits from both the CFTC and FTC against Voyager and its former CEO, Stephen Ehrlich.
A United States Commodity Futures Trading Commission (CFTC) commissioner has criticized Voyager Digital for its errors, which ultimately resulted in the loss of billions of dollars in customer funds.
— CFTC (@CFTC) October 12, 2023
CFTC Commissioner Criticizes Voyager for Customer Fund Losses
In an October 12 statement, CFTC Commissioner Kristin Johnson strongly criticized Voyager Digital for its actions, which led to the loss of billions of dollars of customer funds. She pointed out that Voyager engaged in misleading practices, ignored warning signs, and failed to perform adequate due diligence, leaving its customers unprotected.
Johnson likened Voyager’s actions to building a precarious house of cards, highlighting the company’s inability to oversee the activities of its subsidiary investment firms concerning customer funds. She expressed concern that Voyager failed to pressure these investment firms to maintain transparency in handling customer assets, falling short of its custodial responsibilities. This allowed customer funds to be transferred with minimal efforts to safeguard them.
These comments from Commissioner Johnson came in the wake of legal actions taken by the CFTC and Federal Trade Commission against Voyager’s former CEO, Stephen Ehrlich, on October 12. The CFTC’s lawsuit alleges fraudulent activities and registration failures on Voyager’s platform, including its involvement with an unregistered commodity pool.
It has been frustrating watching lots of obvious malfeasance happening in crypto land and enforcement actions only target low-rent relatively tiny scam operations while the industry was building industrial scale predation machines.
This is not that pattern!
— Patrick McKenzie (@patio11) October 12, 2023
FTC Proposes Settlement and CFTC’s Stance on Regulatory Authority
On October 12, the FTC proposed a settlement with Voyager, outlining the prohibition of the firm from offering, marketing, or promoting any products or services related to depositing, exchanging, investing, or withdrawing assets.
Voyager, along with its affiliates, has agreed to a judgment of $1.65 billion, which will be used to repay customers during the bankruptcy proceedings.
Meanwhile, CFTC Commissioner Caroline Pham, in her statement on October 12, reaffirmed the regulator’s commitment to taking action against cryptocurrency companies that mishandle customer funds. She emphasized the distinction between managing investor money for trading derivatives and accepting deposits and providing loans.
Pham raised questions about the CFTC’s interpretation of what constitutes a commodity pool operator, suggesting that this interpretation might overstep the agency’s statutory authority and disrupt established legal and regulatory frameworks for institutional and consumer finance.
Notably, in a prior development, Pham had called for the establishment of a cryptocurrency regulatory pilot program by the CFTC on September 7, with the aim of addressing the risks faced by retail investors.
Voyager filed for Chapter 11 bankruptcy in July 2022, revealing potential liabilities ranging from $1 billion to $10 billion, owed to over 100,000 creditors. The cryptocurrency brokerage firm began permitting customer withdrawals in June.
Important: Please note that this article is only meant to provide information and should not be taken as legal, tax, investment, financial, or any other type of advice.
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