U.S. FDIC Issues Cease and Desist Order to FTX US Over False Insurance Claims

The United States Federal Deposit Insurance Corporation (FDIC) has issued cease and desist letter to FTX US over “false claims and misleading statements” concerning its insurance coverage. The regulator asked the FTX American affiliate to remove false statements from social media and two websites implying that FDIC insured the business and its product.

FTX US Violated Federal Deposit Insurance Act

According to the letter addressed to Brett Harrison, the chief of FTX US operations, the FDIC said it believes that the crypto exchange, its executives, and related entities have breached Section 18(a) (4) of the Federal Deposit Insurance Act over its insurance deposit status.

The FDIC said in its letter to Harrison that the FTX U.S head of operations made a tweet on July 20 containing false and misleading information stating that the insurance authorities covered assets held on and purchased through the exchange.

In the Twitter post, Harrison told his followers that “direct deposits made by employees to FTX U.S are stored in individually FDIC-insured bank accounts with the user’s name.”

The tweet also read that “stocks deposited at FTXUS are held at FDIC-insured and SIPC- insured brokerage account,” claiming that “FTX is identified as an FDIC-insured crypto exchange on the SmartAsset website and the CryptoSEC.Info website, in which the Corporation has ordered to pull down.

FTX US and Its Products Are Not FDIC Insured

The FDIC explained in the letter sent to Harrison that these false statements contained misleading information that uninsured products are insured.

The regulator further noted that false statements and misrepresentations made by FTXUS imply that the authorities cover the crypto exchange and that funds deposited on the platform are placed, at all times, in an undisclosed FDIC-insured bank.

Additionally, the insurance claims suggest that accounts on FTX US are insured and that FDIC insurance is a legal division for crypto stocks.

However, the Insurance Corporation has refuted the claims, stating that “FTX US is not FDIC-insured and FDIC does not cover any brokerage accounts, or stocks and cryptocurrency.”

FTX Apologies For Misleading Information

Following the order to withdraw its false statements and claims, Harrison said in a Friday tweet that he didn’t mean to mislead anyone regarding the company’s insurance status.

We really didn’t mean to mislead anyone, and we didn’t suggest that FTX US itself, or that crypto/non-fiat assets, benefit from FDIC insurance. I hope this provides clarity on our intentions. Happy to work directly with the FDIC on these important topics.

— Brett Harrison (@Brett_FTX) August 19, 2022

Sam Bankman-Fried, the FTX CEO, also shared a tweet containing an apology for anyone who misunderstood the information disclosed by Harrison.

1) Clear communication is really important; sorry!

FTX does not have FDIC insurance (and we’ve never said so on website etc.); banks we work with do. We never meant otherwise, and apologize if anyone misinterpreted it. https://t.co/MHMSMDE8Le

— SBF (@SBF_FTX) August 19, 2022