CFTC and FTC Sue Former Voyager CEO for Fraud
- The CFTC claims that Ehrlich made several misleading statements about the safety of users’ assets.
- Both FTX and Binance.US had plans to buy out Voyager, but the deals were unsuccessful.
- The bankruptcy court approved Voyager’s repayment plans in May.
The Commodities and Futures Trading Commission (CFTC) filed a lawsuit against Stephen Ehrlich, the former CEO of the now-defunct cryptocurrency lender Voyager Digital, on Thursday for deceiving the platform’s users about the security of their holdings. The CFTC also charged Ehrlich with fraud and registration errors for operating an unregistered commodity pool.
The agency plans to seek permanent trading and registration bans, disgorgement, restitution, and civil monetary penalties. The commission wrote in a statement on Thursday that “Ehrlich and Voyager falsely touted the Voyager platform as a “safe haven” to earn high-yield returns to induce customers to purchase and store digital asset commodities.”
According to CFTC enforcement director Ian McGinley:
While representing that they would treat customers’ digital asset commodities safely and responsibly, behind the scenes, they took shockingly reckless risks with their customers’ assets, leading to Voyager’s bankruptcy and huge customer losses. When their business began to collapse, they continued lying to their customers, concealing Voyager’s true financial health.
In a parallel action, the Federal Trade Commission (FTC) announced that it had struck an agreement with Voyager “that will permanently ban it from handling consumers’ assets” and had sued Ehrlich for erroneously claiming that Voyager accounts were “safe” and insured by the Federal Deposit Insurance Corporation (FDIC). The proposed settlement will see Voyager and its affiliate pay a $1.65 billion fee.
The charges claim that Ehrlich illegally transferred millions of dollars from Voyager to his wife, Francine, who was listed as a relief defendant in the FTC lawsuit. The focus of both lawsuits was Ehrlich’s misleading statements about Voyager’s financial situation in 2022.
Voyager was one of the standout crypto lending platforms prior to its collapse in the 2022 summer. At its peak, Voyager promised customers profits as high as 12% on their assets.
Voyager filed for Chapter 11 bankruptcy protection in July 2022, citing unfavorable market conditions. The case remains unresolved as of this writing. However, the bankruptcy court approved Voyager’s repayment plan in May.
US regulators have taken enforcement actions against several crypto companies and their founders. The CFTC and FTX have pending cases against crypto executives such as the former CEOs of Celsius and FTX, Alex Mashinsky and Sam Bankman-Fried.
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