The Federal Deposit Insurance Corporation (FDIC) has sent cease and desist letters to five companies demanding that they stop making false and misleading statements about FDIC deposit insurance.
FDIC issues cease and desist orders to FTX and other crypto companies for false claims
The FDIC also requires the five companies to take immediate corrective action to address the false or misleading statements, which involve various officers, directors and employees of each company.
The FDIC has collected evidence allegedly showing that each of the companies has claimed or suggested that certain crypto-related products are FDIC-insured or that stocks held in brokerage accounts are FDIC-insured.
The FDIC calls out bogus membership claims
The companies involved are Cryptonews, Cryptosec, SmartAsset, FTX US and FDICCrypto. The FDIC has indicated that the false statements were made by the companies on their websites and social media accounts. As you can see in one of the company names, one of the companies has also registered a domain name that implies an FDIC affiliation that doesn’t actually exist.
The law is very much on the side of the FDIC, as the Federal Deposit Insurance Act (FDI Act) prohibits any person or entity from representing or implying that an uninsured product is insured by the FDIC. You are also prohibited from knowingly misrepresenting the scope and form of any deposit insurance that a product has. In addition, companies are also prohibited from implying that their products are insured by the FDIC by using the letters “FDIC” in their company name, in their advertisements, or in any other documents.
The FDI Act authorizes the FDIC to enforce these prohibitions against any person or entity, such as the five companies mentioned.
FDIC Cease and Desist Letter
The stern letter sent by the FDIC to Cryptonews stated: “The Federal Deposit Insurance Corporation (FDIC) has reason to believe that Cryptonews.com, by and through its officers, directors and employees (collectively referred to herein as ‘Cryptonews’ ), has made false and misleading statements, directly or by implication, about FDIC deposit insurance in violation of section 18(a)(4) of the Federal Deposit Insurance Act (FDI Act), 12 USC and 1828 (a)(4) and its implementing regulation, 12 CFR Part 328, Subpart B (Part 328). We hereby require you to cease and desist, and to take immediate corrective action to address these false and misleading statements, as indicated below.
“Section 18(a)(4) of the FDI Act, 12 USC and 1828(a)(4) and Part 328 prohibit any person from using the name or logo of the FDIC, or similar terms, to represent or imply that an uninsured deposit liability, obligation, certificate or action is insured, or knowingly misrepresent the extent and manner in which a liability, obligation, certificate or deposit action is secured pursuant with the FDI Act. The FDIC has the authority to enforce these provisions against any person or entity. The enforcement tools available to the FDIC include the authority to issue cease and desist orders and to assess civil penalties in money for violations of Section 18(a)(4) and Part 328.”
Corrective actions include the removal of all mentions of the FDIC that may imply affiliation or endorsement.
What is FDIC Deposit Insurance?
FDIC deposit insurance is protection for customers in the event of an FDIC-insured bank failure. To find out if an institution is legitimately insured by the FDIC, first ask an institution representative or look for the FDIC sign at the institution’s online or on-site location. Then you can use the FDIC’s BankFind tool.
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