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Voyager Digital co-founder sued by US regulators for fraud

Voyager Digital co-founder sued by US regulators for fraud
© Reuters. FILE PHOTO: Representations of cryptocurrencies and Voyager Digital logo are seen in this illustration taken, July 7, 2022. REUTERS/Dado Ruvic/Illustrations

 

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By Chris Prentice and Hannah Lang

NEW YORK/WASHINGTON (Reuters) -U.S. regulators sued the former CEO and co-founder of Voyager Digital Ltd on Thursday, saying the executive and the crypto lender misled customers about the safety of their assets while taking “excessive risks” that led to the firm’s demise.

The U.S. Commodity Futures Trading Commission (CFTC) accused Stephen Ehrlich, who helped launch Voyager in 2018, of committing fraud from February to July 2022. Ehrlich and Voyager promised customers a safe haven for digital assets stored on their platform – at times valued at more than $2 billion – while “recklessly” loaning to high-risk counterparties, including four firms that are also now bankrupt, the CFTC said in a lawsuit filed in federal court in New York.

Voyager was one of several crypto firms to collapse in 2022, along with Celsius Network and BlockFi, after crypto prices plummeted amid interest rates and worsening macroeconomic conditions.

Ehrlich could not be reached immediately for comment and Voyager did not respond immediately to a request for comment.

“While representing they would treat customers’ digital asset commodities safely and responsibly, behind the scenes, they took shockingly reckless risks with their customers’ assets, leading to Voyager’s bankruptcy and huge customer losses,” said CFTC enforcement director Ian McGinley in a statement.

The agency said Voyager owed U.S. customers more than $1.7 billion.

The Federal Trade Commission separately said it will permanently ban Voyager from handling consumers’ assets. The agency also filed a lawsuit against Ehrlich for falsely claiming that customers’ accounts were insured by the Federal Deposit Insurance Corporation (FDIC) and were safe, even as the company was approaching bankruptcy.

The FTC’s complaint also names Ehrlich’s wife, Francine Ehrlich, as a relief defendant. She also could not be reached for comment.

New Jersey-based Voyager filed for bankruptcy last July after suspending customer withdrawals and issuing a notice of default to Singapore-based crypto hedge fund Three Arrows Capital for failing to make payments on a crypto loan.

Source: Investing.com

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