Former CEO of Voyager Digital Accused of Fraud by US Regulators
US Regulators Sue Former Voyager Digital CEO for Fraud
The former CEO and co-founder of Voyager Digital Ltd, Stephen Ehrlich, has been sued by US regulators. The US Commodity Futures Trading Commission (CFTC) alleges that Ehrlich misled customers about the safety of their assets and took excessive risks that led to the company’s downfall.
Allegations of Fraud and Misleading Customers
The CFTC claims that Ehrlich and Voyager promised customers a secure platform for their digital assets, valued at over $2 billion, while engaging in reckless lending practices. These practices included lending to high-risk counterparties, four of which are now bankrupt. The lawsuit alleges that Ehrlich committed fraud from February to July 2022.
Multiple Crypto Firms Collapse
Voyager was one of several crypto firms that collapsed in 2022 due to plummeting crypto prices and worsening macroeconomic conditions. Other companies, including Celsius Network and BlockFi, also experienced similar difficulties.
Ehrlich’s Response
In response to the allegations, Ehrlich expressed his outrage and deep dismay. He claims that Voyager’s management team operated in full compliance with existing regulatory structures and worked closely with regulators throughout.
CFTC Enforcement Director’s Statement
The CFTC’s enforcement director, Ian McGinley, stated that Voyager’s actions resulted in the company’s bankruptcy and significant customer losses. The agency asserts that Voyager owes US customers more than $1.7 billion.
FTC Bans Voyager from Handling Consumer Assets
Separately, the Federal Trade Commission (FTC) announced a permanent ban on Voyager handling consumer assets. The FTC also filed a lawsuit against Ehrlich for falsely claiming that customers’ accounts were insured by the Federal Deposit Insurance Corporation (FDIC) and were safe, despite the company’s approaching bankruptcy.
Bankruptcy and Default on Crypto Loan
Voyager filed for bankruptcy in July 2022 after suspending customer withdrawals and issuing a notice of default to Three Arrows Capital, a crypto hedge fund based in Singapore, for failing to make payments on a crypto loan.
The US regulators’ lawsuit against Stephen Ehrlich and Voyager Digital Ltd highlights the allegations of fraud and misleading practices within the crypto lending industry. The collapse of Voyager and other crypto firms raises concerns about the stability and security of digital assets. The outcomes of these legal actions will have significant implications for the future of the industry and its regulation.
