By Frances Yue
The Federal Deposit Insurance Corporation, which protects depositors against the failure of member banks, on Friday issued cease-and-desist order to five companies including digital-asset exchange FTX U.S., for allegedly making false representations that certain products or stocks are FDIC-insured .
The entities that received warnings also include Cryptonews.com, Cryptosec.info, SmartAsset.com and FDICCrypto.com, according to an FDIC statement issued Friday.
“Based upon evidence collected by the FDIC, each of these companies made false representations—including on their websites and social-media accounts—stating or suggesting that certain crypto—related products are FDIC—insured or that stocks held in brokerage accounts are FDIC—insured,” the statement read.
According to FDIC’s letter to FTX.US, Brett Harrison, president of the crypto exchange, tweeted in late July that direct deposits from employers to FTX U.S. are stored individually at FDIC-insured bank accounts in the users’ names. Harrison’s tweet also mentioned that “stocks are held in FDIC-insured and SIPC-insured brokerage accounts,” FDIC said. The tweet has been deleted following the FDIC’s order.
Harrison on Friday tweeted that his social-media missive on Twitter wasn’t intended to mislead the public.
The FDIC has ordered FTX to remove any statements suggesting in any way that FTX U.S. is insured by the government, or any funds held in crypto and other financial products are protected by such FDIC insurance.
“We really didn’t mean to mislead anyone, and we didn’t suggest that FTX U.S. itself, or that crypto/non-fiat assets, benefit from FDIC insurance,” Harrison wrote.
Michael Carvin, chief executive and co-founder at SmartAsset, wrote in an email to MarketWatch that “we are in communication with the FDIC to assess the matter and have removed the content at issue in the meantime.”
Corey Harris, who registered the domain name FDICCrypto.com, said he does not think there was “any intentional infringement.” He would not follow FDIC’s cease and desist order, Harris said.
Representatives at Cryptonews.com and Cryptosec.info didn’t respond to requests seeking comments.
In July, FDIC issued a cease and desist warning to Voyager Digital, asking it to immediately correct its “false and misleading statements” regarding its FDIC deposit insurance status, after the crypto broker filed for bankruptcy.
Created in 1933, amid the Great Depression and the 1929 stock-market crash, the FDIC protects consumer deposits, such as checking, savings and other cash-like accounts, held at member banks. It insures $250,000 in deposits held per account.