FDIC claims FTX’s funds are not protected

FDIC claims FTX’s funds are not protected.

Federal Deposit Insurance Corporation (FDIC) issued a cease-and-desist order to Sam Bankman’s cryptocurrency exchange FTX for falsely claiming the FDIC was insuring its assets.

A bank account is the only place where funds are protected. According to the FDIC, FTX US President Brett Harrison stated in a since-deleted tweet that employers’ direct payments are stored in individual FDIC-insured bank accounts.

FDIC claims FTX's funds are not protected

Securities are held in SIPC [Security Investor Protection Corporation]-insured brokerage accounts, the questioned tweet continues. There is a claim by the FDIC that this misrepresents FTX and the funds their clients invest are covered by the FDIC.

A second tweet by Harrison that is probably untrue implies that, despite not being mentioned in the FDIC’s letter, “cash associated with brokerage accounts is processed into FDIC-insured accounts” at FTX’s “partner bank.”

FDIC claims FTX's funds are not protected

According to Harrison’s response to the FDIC’s letter, FTX “did not suggest FTX US was insured by the FDIC, nor did crypto/non-fiat assets,” and the company “really didn’t wish to mislead anyone.”

He replied. Bankman-Fried, who is the CEO and creator of FTX, said that, while the company doesn’t have FDIC protection, its bank partners do. For the protection of its customers,

The company may explore alternative methods for using direct deposit in the future, according to a statement.

I would be happy to work with the FDIC on FTX as well. According to the FDIC, businesses cannot convey that their goods are FDIC-insured by using the term “FDIC” in their names, advertisements, or other documents.

The FDIC has given FTX 15 days to remove or correct any misrepresentations. Cryptonews.com, Cryptosec.info, and SmartAsset.com and and FDICCrypto.com were also sent cease-and-desist letters along with FTX.

FDIC claims

Like Robinhood, FTX now offers both traditional equities and cryptocurrencies for trading. The FDIC declined to comment further than what it said in its letter. Billionaire Bankman-Fried reported a 7.6% increase in May. There are reports that he owns stock in Robinhood and may acquire the trading platform in the future.

 

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