Former Voyager CEO Faces U.S. Fraud and False Claims Charges

Police & Regulations
Oct 14, 2023 at 10:55 am

Steve Ehrlich, the former CEO of Voyager Digital, finds himself entangled in legal troubles as both the Federal Trade Commission (FTC) and the Commodity Futures Trading Commission (CFTC) have initiated lawsuits against him. This move not only places Ehrlich under scrutiny but also highlights the growing significance of designating USDC as a commodity.

The regulatory authorities in the United States have brought forward allegations of fraudulent behavior and deliberate misrepresentation of safeguards provided to customers by the government against Steve Ehrlich. These allegations stem from his tenure as the CEO of Voyager Digital.

In a joint announcement, the CFTC and FTC not only detailed their legal pursuits against Ehrlich but also explicitly classified both Circle's USDC stablecoin and Bitcoin as commodities in their legal documentation.

Ehrlich faces charges from the CFTC for deceiving customers through the dissemination of false information regarding the financial stability of the company and conducting business without the requisite registrations. The FTC has also asserted that he dishonestly claimed customers' funds were protected by the Federal Deposit Insurance Corp.

Ian McGinley, the CFTC's director of enforcement, emphasized that both Ehrlich and Voyager misled customers. The lawsuit seeks redress, fines, and industry bans for the former executive. According to McGinley, behind the scenes, risky decisions were made with customers' assets, leading to Voyager's insolvency and significant customer losses.

One of the commissioners at the agency, Caroline Pham, contested the CFTC's stance that the company should have registered as a commodity pool operator, deeming it an incorrect interpretation of the law. Pham argued that the definition of commodity pools in the enforcement action could be overly broad, potentially including commonplace lending activities.

The CFTC took the opportunity to specify which assets it considers commodities, asserting that certain digital assets, including BTC, USDC, and others, fall under this classification. This aligns with the agency's position in recent similar cases.

In addition to legal action, the FTC reached a resolution with the company, permanently prohibiting Voyager from overseeing customers' assets. The company also faces a substantial $1.65 billion judgment, temporarily held in abeyance to facilitate the ongoing liquidation process for reimbursing its customers.

Samuel Levine, the director of the FTC's Bureau of Consumer Protection, underlined the importance of responsible and accurate claims regarding FDIC insurance, emphasizing that companies and individuals must exercise caution in this regard. Following Voyager's collapse in July 2022, attempts to salvage the situation through a sale to both FTX and Binance proved unsuccessful, leaving former Voyager customers expecting to recover only a fraction of their assets.

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