FDIC Flags OKCoin for 'Misleading Representations' of Deposit Insurance

The US Federal Deposit Insurance Corp. (FDIC) has ordered OKCoin to remove misleading statements that suggest that its customers' accounts were insured through the government agency. FDIC issued the order on Thursday in a letter addressed to the exchange's CEO, Hong Fang.

FDIC has directed that OKCoin, the San Francisco-based exchange affiliated with OKX, immediately remove any offending claims from its website. Failure to do so, the banking regulator warned, could face further enforcement actions.

Cease-and-Desist Order

"OKCoin is not FDIC-insured, and the FDIC does not insure non-deposit products," the agency said in the cease-and-desist order. "By not distinguishing between US-dollar deposits and crypto assets, the statements imply FDIC insurance coverage applies to all customer funds (including crypto assets)."

FDIC pointed out three instances in the letter where OKCoin misrepresented its insurance status. One is through an advert where the exchange said it was licensed across the US with FDIC insurance on OKCoin accounts.

Furthermore, according to the watchdog, the exchange stated that the Provenance Blockchain's HASH token based on OKCoin had 'received broad regulatory acceptance from the SEC, OCC, FED, and the FDIC'. The exchange informed its US customers that it offered FDIC insurance on USD deposits, the FDIC said.

OKCoin has been given 15 days by the banking regulator to respond through written confirmation that it has complied with the issued directives. The regulator maintains that it focuses solely on insuring banks, and the same does not apply to cryptocurrency firms with bank accounts.

FDIC's Guidelines

It is not the first time the banking regulator has accused crypto companies of alleged false representation that their accounts were insured with the agency. In 2022, the FDIC issued five cease-and-desist orders against several crypto firms, including the now-bankrupt FTX.

"The Federal Deposit Insurance Act (FDI Act) prohibits any person from representing that an uninsured deposit is insured or from knowingly misrepresenting the extent and manner in which a deposit or certificate is insured under the FDI Act, whereby making affirmative statements of by omitting material information," the FDIC said.

Besides, the FDIC ordered the collapsed cryptocurrency lender, Voyager Digital, to stop claiming that the government agency had insured its cryptocurrency funds. In the allegations, the FDIC said that Voyager's alleged misrepresentation of facts could have been relied upon by investors who invested with the firm and could not get immediate access to their funds.