Former CEO of Crypto Lender Voyager Charged with Fraud by US Regulator

US regulator charges former CEO of crypto lender Voyager with fraud

The US Commodity Futures Trading Commission (CFTC) has filed fraud charges against the former CEO of insolvent cryptocurrency lender Voyager Digital. The regulator accuses Stephen Ehrlich and the company of luring investors with promises of high returns despite violating derivatives regulations. Ehrlich was also sued by the Federal Trade Commission (FTC).

The CFTC has filed a lawsuit against Voyager Digital co-founder and former CEO Stephen Ehrlich. The complaint, filed in court, accuses him of fraud and violations of registration requirements in connection with Voyager and the operation of an unregistered commodity pool, the Commission announced.

The US regulator also claims that Ehrlich and the company falsely promoted Voyager as a “safe haven” offering the opportunity to earn high returns of up to 12% to entice customers to purchase digital assets on the platform and save. Ian McGinley, head of the CFTC’s enforcement division, commented on the commission’s legal action:

“Honest and Voyager lied to Voyager’s customers. Although they have stated that they treat their customers’ digital assets safely and responsibly, behind the scenes they have taken shockingly reckless risks with their customers’ assets, resulting in Voyager’s bankruptcy and significant customer losses.”

The CFTC said Ehrlich and Voyager pooled and transferred billions of dollars of their customers’ digital assets as “loans” to high-risk third parties. As an example, they cited the transfer of over $650 million in client funds to a digital assets hedge fund identified as “Company A” without proper due diligence.

Voyager filed for bankruptcy in early July 2022 amid volatile cryptocurrency markets and the collapse of hedge fund Three Arrows Capital (3AC). The latter had defaulted on a $650 million loan from the cryptocurrency lender. Voyager’s collapse resulted in losses of $1.7 billion for customers in the United States.

“As their business began to collapse, they continued to lie to their customers and hide Voyager’s true financial health. In addition to their fraud, Ehrlich and Voyager breached the trust of their customers while acting in roles that required CFTC registration that they had not obtained,” McGinley added.

The Federal Trade Commission also sued Ehrlich on Thursday for falsely claiming that customers could rely on federal coverage for bank deposits. He and Voyager are accused of violating the FTC Act and the Gramm-Leach-Bliley Act.

In a statement quoted by Bloomberg, Ehrlich said he was “outraged and deeply shocked” by the allegations from the two regulators and that he was being used as a “scapegoat.” He blames others in the industry for the losses incurred by Voyager’s customers and creditors.

What do you think about the CFTC and FTC’s legal actions against Voyager and former CEO Stephen Ehrlich? Let us know your thoughts in the comments section.