CFTC and FTC Take Ex-CEO of Bankrupt Voyager to Court for False Claims

The US Commodity Futures Trading Commission (CFTC) and the Federal Trade Commission (FTC) have taken legal action against Stephen Ehrlich, the former CEO of the now-bankrupt crypto platform Voyager, for his many false representations to customers.

Voyager Settled with the FTC

The confirmation came yesterday (Thursday) after the FTC settled with Voyager, imposing a permanent ban from handling customers' funds.

In the lawsuit against Ehrlich, the FTC highlighted his false claims that the Federal Deposit Insurance Corporation insured the customers' accounts, creating a fake aura of safety even when bankruptcy was approaching. Ehrlich controlled three firms: Voyager Digital Ltd., Voyager Digital Holdings, Inc., and Voyager Digital LLC, collectively known as Voyager.

According to the CFTC's complaint, Ehrlich and Voyager defrauded customers by misrepresenting the safety and financial health of the Voyager digital asset platform from at least February 2022 through July 2022. The platform promises high-yield returns of up to 12 percent on stored digital assets, promoting itself as a "safe heaven". At its peak, the platform held over $2 billion in digital assets.

A Risky Reality

In reality, the platform pooled billions of dollars worth of customers' digital assets and loaned them to high-risk counterparties. In 2022, Voyager transferred over $650 million to a digital asset hedge fund on an unsecured basis. The problem for Voyager started after the hedge fund defaulted on the request to recall the digital assets in June 2022.

However, it continued its false representations to the customers, reiterating that the digital assets were safe. Voyager filed for bankruptcy on July 5, 2022, owing customers over $1.7 billion.

The CFTC has charged Ehrlich for violating registration norms, as his platform operated as a commodity pool operator without a license. It is now seeking restitution, disgorgement, civil monetary penalties, and permanent trading and registration bans.

"This is yet another CFTC action seeking to hold accountable a chief executive officer for his role in the fraudulent operation of a digital asset platform," said Ian McGinley, CFTC's Director of Enforcement.

"Ehrlich and Voyager lied to Voyager customers. While representing 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. Amplifying their fraud, Ehrlich and Voyager broke their trust with customers while acting in capacities that required CFTC registration, which they failed to obtain."