Former Voyager Digital CEO Faces Fraud Charges in Dual Lawsuits by CFTC and FTC over False Claims

In a significant legal move, the United States Commodity Futures Trading Commission (CFTC) and the Federal Trade Commission (FTC) have taken simultaneous actions against Stephen Ehrlich, the former CEO of Voyager Digital, a prominent crypto lending firm.

The CFTC announced on October 12 that it had filed a lawsuit in the U.S. District Court for the Southern District of New York, targeting Ehrlich and Voyager for alleged fraud and “registration failures” related to the platform and its purported “unregistered commodity pool.” The commission stated its intent to seek restitution, disgorgement, civil monetary penalties, and permanent trading and registration bans.

Ian McGinley, the CFTC’s enforcement director, emphasized the deceptive practices carried out by Ehrlich and Voyager, stating, “Ehrlich and Voyager lied to Voyager customers. While publicly claiming they would handle customers’ digital asset commodities safely and responsibly, they engaged in shockingly reckless risks with their customers’ assets, resulting in Voyager’s bankruptcy and substantial customer losses. Even as their business crumbled, they continued to deceive their customers, concealing Voyager’s true financial state.”

Concurrently, the FTC disclosed that it had reached a settlement with Voyager, effectively banning the firm from managing consumers’ assets. Simultaneously, the FTC filed a lawsuit in the U.S. District Court for the Southern District of New York against Ehrlich. The allegations revolved around Ehrlich’s claim that Voyager accounts were insured by the Federal Deposit Insurance Corporation (FDIC) and were “safe.” As part of the proposed settlement, Voyager and its affiliated entities agreed to pay a substantial fee of $1.65 billion.

The heart of the FTC’s complaint centered on Voyager’s assertion that USDC deposits were FDIC insured. Ehrlich was accused of transferring millions of dollars from Voyager to his wife, Francine, who was included as a relief defendant in the FTC case. Both lawsuits were built on allegedly fraudulent statements made by Ehrlich concerning Voyager’s financial stability in 2022.

It’s worth noting that Voyager had filed for Chapter 11 bankruptcy protection in July 2022 amid the broader downturn in the cryptocurrency market. As of the time of this publication, the bankruptcy case remains ongoing. Earlier, the bankruptcy court approved Voyager’s plan to reimburse its customers.

This legal action against Ehrlich mirrors a broader trend, with both the CFTC and FTC actively pursuing cases against cryptocurrency firms and their executives. Other notable cases include actions against former Celsius CEO Alex Mashinsky and former FTX CEO Sam Bankman-Fried. Notably, Bankman-Fried’s initial criminal trial commenced on October 3. Additionally, in July, Binance and its CEO, Changpeng Zhao, sought the dismissal of a CFTC lawsuit alleging the company provided unregistered derivatives products, underscoring the increasing scrutiny faced by the cryptocurrency industry.

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