Key takeaways:
- Stephen Ehrlich is the target of concurrent lawsuits brought by the FTC and the United States CFTC.
- The commission intended to pursue permanent trading and registration prohibitions, disgorgement, restitution, and civil monetary penalties.
Stephen Ehrlich, the former CEO of the cryptocurrency lending company Voyager Digital, is the target of concurrent lawsuits brought by the Federal Trade Commission (FTC) and the United States Commodity Futures Trading Commission (CFTC).
The CFTC said on October 12 that it has brought legal action against Ehrlich and Voyager in the US District Court for the Southern District of New York, alleging fraud and “registration failures” pertaining to the platform and its “unregistered commodity pool.”
The commission intended to pursue permanent trading and registration prohibitions, disgorgement, restitution, and civil monetary penalties. According to Ian McGinley, director of enforcement for the CFTC, “Ehrlich and Voyager lied to Voyager customers.”
“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.”
In a related case, the Federal Trade Commission (FTC) announced that it and Voyager had reached a settlement that would prohibit the latter from “handling consumers’ assets” indefinitely.
Ehrlich was sued in the US District Court for the Southern District of New York for asserting that Voyager accounts were “safe” and protected by the Federal Deposit Insurance Corporation (FDIC).
Voyager and its affiliates will pay a $1.65 billion charge as part of the proposed settlement. Voyager’s assertion that FDIC insurance covered USDC deposits was the main target of the FTC’s lawsuit.
Ehrlich purportedly moved millions of dollars from Voyager to his wife Francine, who was listed as a relief defendant in the FTC lawsuit. Both claims focused on Ehrlich’s claimed false representations about Voyager’s financial situation in 2022.
Amidst the decline in the cryptocurrency market, Voyager filed for Chapter 11 bankruptcy protection in July 2022; the case is still pending as of this writing. Voyager’s plan to reimburse customers was approved by the bankruptcy court in May.
Cases against cryptocurrency companies and their executives are underway with the CFTC and FTC. Among them are former CEOs of Celsius and FTX, Alex Mashinsky and Sam Bankman-Fried, whose first criminal trial began on October 3.
