Voyager Digital ‘No better than a house of cards’ – CFTC Commissioner
The commissioner of the United States Commodity Futures Trading Commission said Voyager Digital's mistakes ultimately cost it billions of dollars in customer money.
Statement by @CFTCjohnson regarding @cftc's charges against Voyager's CEO. Learn more: https://t.co/OiBvOoCuV6
— CFTC (@CFTC) October 12, 2023
In an Oct. 12 statement, Commissioner Christine Johnson said Voyager had failed to protect customers by ignoring warning signs and “bare-bones due diligence.”
Because of Voyager's failure, the company was no better than a house of cards.
The Commodity Commissioner said Voyager did not condone its subsidiary investment firms operating with their own client funds.
“It is surprising that Voyager has not been able to put pressure on the firms in which it has invested its clients' assets.”
“Instead of asking investment firms that have received client assets to provide more transparency, Voyager has abandoned long-held expectations from custodians and sent them with little effort to save clients' money more easily,” she added.
Johnson's comments come after the regulator filed a parallel lawsuit with the Federal Trade Commission on Oct. 12 against Voyager's former CEO, Stephen Ehrlich.
The CFTC's lawsuit alleges that Ehrlich and Voyager committed fraud and “registration failures” on the platform and an “unregistered commodity pool.”
While the industry is building industrial-scale hunting machines, it is frustrating to see so many blatant violations in crypto land and enforcement actions targeting only relatively small scams at low rents.
This is not that design!
— Patrick McKenzie (@patio11) October 12, 2023
On the other hand, the FTC has reached an agreement with Voyager that prohibits the company from offering, marketing, or promoting any product or service that is used to deposit, exchange, invest, or withdraw any assets in an October 12 statement.
Voyager and its affiliates agreed to a $1.65 billion judgment to repay customers in bankruptcy proceedings.
Meanwhile, in a separate October 12 statement from CFTC Commissioner Caroline Pham, the regulator said it would continue to take action against cryptocurrency companies that misappropriate customer funds.
“There's a big difference between managing investor money for business transactions and taking deposits and lending to others. Without financing and consumer credit, our economy would grind to a halt.”
Related: CFTC issues $54M default judgment against trader in crypto fraud scheme
However, Pham thinks the CFTC overstepped the bounds of its mandate by interpreting what constitutes a commodity pool operator:
“Such a definition goes beyond the statutory authority and undermines the well-established legal and regulatory framework for lending to institutions and consumer finance.”
On September 7, Pham called on the CFTC to establish a cryptocurrency regulatory pilot program that would address concerns faced by retail investors.
Voyager filed for Chapter 11 bankruptcy in July 2022, with more than 100,000 creditors owed between $1 billion and $10 billion in assets.
The cryptocurrency brokerage firm opened withdrawals for clients in June.
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