The U.S. Commodity Futures Trading Commission (CFTC) has filed a lawsuit against former Voyager Digital CEO Stephen Ehrlich, alleging fraud and failure to register the cryptocurrency lender with the agency. The CFTC's lawsuit, announced on October 12, accuses Ehrlich and Voyager Digital of misleading customers by falsely portraying the crypto platform as a safe haven for purchasing and storing assets and promising returns of up to 12%.
These misleading representations encouraged customers to deposit over $2 billion worth of cryptocurrency assets on Voyager. However, Ehrlich and Voyager Digital lent these assets to third-party entities with a high risk profile. When one of these entities defaulted on repayments, it triggered a liquidity crisis for Voyager Digital, which subsequently filed for Chapter 11 bankruptcy in July 2022, leaving users owed over $1.7 billion.
Ian McGinley, CFTC Director of Enforcement, noted that Ehrlich and Voyager Digital appeared to be treating customers' digital assets safely while recklessly risking them behind the scenes. They concealed their true financial condition from customers, and their failure to obtain CFTC registration compounded their fraudulent conduct and damaged customer trust.
In parallel to the CFTC's lawsuit, the Federal Trade Commission (FTC) announced a settlement with Voyager Digital. The FTC also sued Ehrlich, alleging that he falsely claimed that customers' deposited funds were insured by the Federal Deposit Insurance Corporation (FDIC), an inaccurate statement, as FDIC insurance does not cover cryptocurrency assets. As part of the settlement, Voyager Digital and its affiliated entities will make a $1.65 billion payment and are permanently barred from handling customer funds.
Ehrlich has not reached a settlement with the FTC, and the regulator intends to proceed with the case against the former Voyager CEO in federal court. The CFTC is seeking civil penalties, disgorgement, compensation for affected customers, and permanent trading and registration bans against Ehrlich.
