The Federal Deposit Insurance Corporation (FDIC) slapped Sam Bankman-Fried-owned cryptocurrency exchange FTX with a cease-and-desist order over “false and misleading statements” that suggest its assets are FDIC-insured. The FDIC does not cover stocks or crypto, and only protects funds held in insured bank accounts.
In a letter to the exchange, the FDIC points to a now-deleted tweet from FTX Chairman Brett Harrison, which stated that “direct deposits in FTX US from employers are transferred to individual users in FDIC-insured bank accounts.” is stored under the name of The referenced tweet also stated that “stocks are FDIC-insured and held at SIPC”. [Security Investor Protection Corporation]-Insured brokerage accounts. The FDIC claims that this falsely represents that FTX and the funds invested by users are FDIC-insured, while they are in fact not.
While not flagged in the FDIC’s letter, users have pointed to another potentially misleading tweets From Harrison who states that “cash associated with brokerage accounts is managed in FDIC-insured accounts” at FTX’s “Partner Banks”.
We really did not intend to mislead anyone, and we did not suggest that FTX US, or crypto/non-fiat assets, benefit from FDIC insurance. I hope this provides clarity on our intentions. It is a pleasure to work directly with the FDIC on these important topics.
— Brett Harrison (@brett_ftx) August 19, 2022
1) Clear communication is really important; Pardon me!
FTX does not have FDIC insurance (and we have never said so on the website etc.); Banks we work with. We never wanted otherwise, and apologize if anyone misinterpreted it. https://t.co/MHMSMDE8Le
— SBF (@SBF_FTX) August 19, 2022
Harrison has since Issued a response to the FDIC’s letter, explaining that FTX “didn’t really mean to mislead anyone,” and claims FTX “did not suggest that FTX US, or that crypto/non-fiat asset, benefits from FDIC insurance.” FTX CEO and Founder Bankman-Fried provided further explanation Also, stating that “FTX does not have FDIC insurance,” the banks with which it does business do. Bankman-Fried adds that it could “explore potential ways that personal accounts using direct deposit … could, in the future, be used to protect customers,” and that the FTX is “on that FDIC”. Will be excited to work with you.”
As noted by the FDIC, the Federal Deposit Insurance Act (FDI Act) allows companies to “demonstrate that their products are FDIC—insured by using ‘FDIC’ in company names, advertisements, or other documents.” The FDIC is giving the FTX 15 days to confirm that it has removed or corrected any alleged misrepresentation. In addition to FTX, the FDIC issued a cease-fire warning to four other companies, including Cryptonews.com, Cryptosec.info, SmartAsset.com and FDICCrypto.com.
The FDIC declined to comment beyond the contents of its letter, and the FTX did not immediately respond. ledgeComment request.
Like Robinhood, FTX has started offering both traditional stock and crypto trading options. In May, crypto billionaire Bankman-Fried disclosed a 7.6 percent stake in Robinhood, and he is reportedly considering buying the trading platform.
Even with the so-called crypto winter leading many crypto companies to bankruptcy, FTX and Bankman-Fried’s crypto trading firm Alameda Research have somehow managed to stay afloat. Banksman-Fried has extended lines of credit to several struggling crypto firms to help them weather the uncertain economy. Reuters He has “a few billion” more for future bailouts. According to documents obtained by CNBC, FTX generated $1.02 billion in revenue in 2021 and $270 million in the first quarter of 2022.