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CFTC Files Lawsuit Against Voyager Digital And Former CEO For Fraud

The US Commodity Futures Trading Commission (CFTC) has taken legal action against Voyager Digital and its former CEO, Stephen Ehrlich. 

The CFTC filed a complaint in the US District Court for the Southern District of New York, alleging fraud and registration failures related to the operation of the Voyager digital asset platform and an unregistered commodity pool.

Voyager Faces Legal Action For ‘Misleading Customers’

According to the CFTC, Ehrlich falsely marketed the Voyager platform as a safe haven for high-yield returns, deceiving customers to purchase and store digital assets. 

Per the filing, Voyager allegedly took “reckless risks” with customers’ assets, leading to Voyager’s bankruptcy and significant customer losses. The lawsuit seeks various penalties, including restitution, disgorgement, civil monetary penalties, permanent trading and registration bans, and a permanent injunction against further violations of the Commodity Exchange Act.

In a separate but related action, the Federal Trade Commission (FTC) has charged Voyager and Stephen Ehrlich with violating the FTC Act and the Gramm-Leach-Bliley Act. 

The FTC alleges that the company falsely claimed customers’ accounts were insured by the Federal Deposit Insurance Corporation (FDIC) and misled consumers about the safety of their deposits.

The FTC’s complaint states that Voyager enticed customers to deposit funds by assuring them of the safety of their assets on the platform. However, Voyager was neither a bank nor a financial institution, and the deposits were not eligible for FDIC insurance. 

The FTC alleges that consumers suffered significant losses when Voyager experienced financial difficulties, including being locked out of their accounts and losing over $1 billion in cryptocurrency assets.

Stephen Ehrlich Rejects Settlement 

Voyager and its affiliates will be permanently banned from handling consumers’ assets and offering related services as part of a proposed settlement. 

The companies have also agreed to a judgment of $1.65 billion, which will be suspended to allow Voyager to return the remaining assets to consumers during the bankruptcy proceedings. 

Stephen Ehrlich, however, has not agreed to a settlement, and the FTC’s case against him will proceed in federal court.

The FTC’s complaint further alleges that Ehrlich transferred millions of dollars to his wife, Francine Ehrlich, including funds linked to the alleged unlawful conduct. 

The proposed settlement also prohibits Voyager and its affiliates from misrepresenting product benefits, making false representations to obtain financial information, and disclosing consumer information without consent.

Both regulatory bodies are seeking to hold Voyager, Stephen Ehrlich, and other involved parties accountable for their alleged deceptive practices and violations of financial regulations. 

Voyager

Featured image from Shutterstock, chart from TradingView.com 

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More Selling? Bankrupt Voyager Sends Millions In SHIB And ETH To Coinbase

Voyager Digital has been busy in recent months as it looks to sell its remaining crypto holdings on centralized exchanges. In its latest move, the bankrupt crypto brokerage has transferred millions in SHIB and ETH to Coinbase. According to on-chain data, Voyager moved SHIB and ETH tokens to Coinbase’s ledger on Friday, August 11.

Millions In SHIB And ETH Transferred To Coinbase By Voyager

Voyager has been selling off assets since the beginning of the year. Specifically, the latest on-chain transactions show that Voyager moved a total of $5.5 million in crypto to Coinbase. The transactions consisted of 1,500 ETH sent in two transactions. 

Before being moved to Coinbase, 1,000 ETH and 500 ETH, with a combined value of $2.77 million, were sent to separate wallets. Another 250 billion SHIB valued at $2.7 million was then sent to Coinbase. 

On-chain data also shows that Voyager has been moving all its token holdings to its primary address. This likely means the company is consolidating its crypto assets before moving them to crypto exchanges.

Looking To Pay Pack Customers

Voyager’s goal is to eventually reimburse all customer accounts, at least partially. The firm went bankrupt last year after the failure of crypto hedge fund Three Arrows Capital which failed to repay its $665 million Voyager loan. The company, however, received court approval in May 2023 to begin winding down its operations and start repaying customers a portion of their crypto assets that’s been locked for over a year.

According to court filings, Voyager had only about $630 million to pay back $1.8 billion in customer claims. As a result, Voyager users could only claim 35.72% of their tokens. They could either withdraw their claims immediately or choose to wait for 30 days to be paid in USD after Voyager sells the tokens. 

Voyager (VGX) token price chart from Tradingview.com

At the time, data from Arkham Intelligence showed that Voyager had $268 million in ETH, $236 million in USDC, and $77 million in SHIB. But now that the time for customer claims is over, Voyager seems to be consolidating its remaining assets into one address before selling them. According to Arkham Intel, there is currently about $81.63 million worth of cryptocurrency left in Voyager addresses.

What This Means For SHIB And ETH Prices

The recent transfers of millions of dollars in SHIB and ETH tokens from Voyager Digital to Coinbase could signal selling pressure is on the way for the two cryptocurrencies. If Coinbase unloads these tokens onto the open market, it may drive prices down further as supply outpaces demand. 

SHIB is currently on a roll and is up by 15.55% in a 7-day timeframe. ETH, on the other hand, is currently ranging around $1,850 after the ETH ecosystem reached a milestone recently with the number of non-zero addresses reaching a new all-time high.

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Voyager Digital Customers Left High And Dry With Only 35% Crypto Deposit Recovery

According to a Reuters report, Crypto lender Voyager Digital’s efforts to reorganize under Chapter 11 have ended, with a U.S. Bankruptcy Judge approving their proposed liquidation plan. 

The company filed for bankruptcy protection last July due to volatility in cryptocurrency markets and a default on a large loan made to crypto hedge fund Three Arrows Capital, which will return customers about $1.33 billion in crypto assets. However, customers will only recover about 35% of their cryptocurrency deposits as the company winds down its operations after a failed buyout attempt by crypto exchange Binance.US.

Voyager Leaves Customers With Only Fraction Of Deposits

Voyager’s bankruptcy case was complicated by two failed sale attempts during the bankruptcy process. The company initially sought to sell its assets for $1.42 billion to FTX, a deal that failed when FTX imploded in November. Binance.US signed a $1.3 billion offer but called off the deal on April 25, citing a “hostile and uncertain regulatory climate.”

Per the report, Voyager customers’ recovery hopes are now heavily dependent on the outcome of litigation with FTX, which is seeking to claw back $445 million in loan repayments made to Voyager before FTX collapsed into bankruptcy.

However, If Voyager fully prevails in the FTX litigation, customers’ expected recovery would be 63.74%, according to Voyager’s court filings.

Voyager intends to repay customers with the same type of cryptocurrency that they had in their accounts. However, for deposits held in unsupported cryptocurrencies that cannot be withdrawn from Voyager’s platform and for Voyager’s proprietary VGX token, Voyager will instead repay customers using the Circle’s stablecoin USDC.

Voyager was one of several crypto lenders to file for bankruptcy in 2022 after a boom in the COVID-19 pandemic. Other companies that filed for bankruptcy include Celsius Network, BlockFi, and Genesis Global Capital. 

Did the SEC Play A Role in Binance.US’s Failed Acquisition?

There are speculations that the Securities and Exchange Commission (SEC) may have had a hand in Binance.US’s failed $1.3 billion acquisition of crypto lender Voyager Digital. The buyout was called off in April, with Binance.US citing a “hostile and uncertain regulatory climate.” However, some industry experts believe the SEC’s increased scrutiny of the crypto industry may have played a role in the failed acquisition.

The Securities and Exchange Commission has been ramping its efforts to regulate the cryptocurrency industry. As a result, firms like Coinbase have been exploring ways to expand their operations to other jurisdictions. 

France, in particular, has been welcoming these firms due to the regulatory uncertainty in the United States. Market experts and even senators have criticized this approach by the regulatory agency, who argue that a clear rulebook is needed to promote innovation and diversify investment opportunities for American clients of crypto firms. A clear regulatory framework will benefit not only the industry but also the country as a whole.

Voyager

Featured image from iStock, chart from TradingView.com