CFTC Files Lawsuit Against Voyager Digital And Former CEO For Fraud

The US Commodity Futures Trading Commission (CFTC) has taken legal action against Voyager Digital and its former CEO, Stephen Ehrlich. 

The CFTC filed a complaint in the US District Court for the Southern District of New York, alleging fraud and registration failures related to the operation of the Voyager digital asset platform and an unregistered commodity pool.

According to the CFTC, Ehrlich falsely marketed the Voyager platform as a safe haven for high-yield returns, deceiving customers to purchase and store digital assets. 

Per the filing, Voyager allegedly took “reckless risks” with customers’ assets, leading to Voyager’s bankruptcy and significant customer losses. The lawsuit seeks various penalties, including restitution, disgorgement, civil monetary penalties, permanent trading and registration bans, and a permanent injunction against further violations of the Commodity Exchange Act.

In a separate but related action, the Federal Trade Commission (FTC) has charged Voyager and Stephen Ehrlich with violating the FTC Act and the Gramm-Leach-Bliley Act. 

The FTC alleges that the company falsely claimed customers’ accounts were insured by the Federal Deposit Insurance Corporation (FDIC) and misled consumers about the safety of their deposits.

The FTC’s complaint states that Voyager enticed customers to deposit funds by assuring them of the safety of their assets on the platform. However, Voyager was neither a bank nor a financial institution, and the deposits were not eligible for FDIC insurance. 

The FTC alleges that consumers suffered significant losses when Voyager experienced financial difficulties, including being locked out of their accounts and losing over $1 billion in cryptocurrency assets.

Voyager and its affiliates will be permanently banned from handling consumers’ assets and offering related services as part of a proposed settlement. 

The companies have also agreed to a judgment of $1.65 billion, which will be suspended to allow Voyager to return the remaining assets to consumers during the bankruptcy proceedings. 

Stephen Ehrlich, however, has not agreed to a settlement, and the FTC’s case against him will proceed in federal court.

The FTC’s complaint further alleges that Ehrlich transferred millions of dollars to his wife, Francine Ehrlich, including funds linked to the alleged unlawful conduct. 

The proposed settlement also prohibits Voyager and its affiliates from misrepresenting product benefits, making false representations to obtain financial information, and disclosing consumer information without consent.

Both regulatory bodies are seeking to hold Voyager, Stephen Ehrlich, and other involved parties accountable for their alleged deceptive practices and violations of financial regulations. 

Featured image from Shutterstock, chart from TradingView.com