FDIC Issues Cease and Desist Letters for Deposit Insurance Misrepresentations
The FDIC recently issued four letters demanding that two entities and two websites cease and desist from making false and misleading statements about FDIC deposit insurance.
The Federal Deposit Insurance Act (FDI Act) and its implementing regulation prohibit any person from representing or implying that an uninsured product is FDIC-insured or from knowingly misrepresenting the extent and manner of deposit insurance. The FDIC alleged that two entities – a non-bank financial service provider and a cryptocurrency exchange (together, the Entities) – violated the FDI Act by making false and misleading representations stating, implying, or suggesting that they are FDIC-insured and that FDIC insurance would provide protection for customers’ assets. The FDIC asserts that the Entities are in fact not FDIC-insured and the Entities’ statements are likely to mislead, and potentially harm, consumers. To the extent that the Entities’ representations relate to funds placed in accounts at insured depository institutions (IDIs), the Entities allegedly made material omissions by failing to identify the IDIs with which consumers’ funds may be placed or deposited into.
Additionally, the FDIC alleged that two websites (together, the Websites) made similar false and misleading statements about the FDIC-insured status of the cryptocurrency exchange, in violation of the FDI Act.
The letters demand that the Entities and Websites cease and desist from making false and misleading statements about FDIC deposit insurance and take immediate corrective action to address the alleged false or misleading statements.
The FDIC emphasizes that FDIC insurance does not protect cryptocurrency or any assets other than U.S. dollar deposits held at IDIs. Additional information about deposit insurance and crypto companies can be found on a Fact Sheet provided by the FDIC.