Voyager Digital Criticized by CFTC for Billions in Client Asset Losses
Summary:
Voyager Digital, a crypto trading platform, faced severe criticism from Kristin Johnson, a US Commodity Futures Trading Commission (CFTC) commissioner, for its negligence resulting in the loss of billions of client assets. Accusations of fraud and registration failures led to lawsuits against former Voyager CEO, Stephen Ehrlich. A tentative settlement with the Federal Trade Commission (FTC) saw Voyager conceding to a $1.65 billion judgment to compensate clients throughout ongoing bankruptcy proceedings. The firm earlier stated potential liabilities between $1 billion and $10 billion, while having started client withdrawals in June.
A US Commodity Futures Trading Commission (CFTC) representative has harshly criticized Voyager Digital for their critical errors, which resulted in the huge loss of billions of dollars of client assets. Commissioner Kristin Johnson publicly denounced Voyager in a statement made on October 12th, accusing them of deceptive behaviour, neglecting cautionary signs and minimal due diligence, thereby failing to safeguard clients. Johnson holds that the company's negligence made it no more stable than a "house of cards", expressing outrage over Voyager's failure to effectively oversee the conduct of its investment subsidiary firms with regards to clients' assets. Consequently, lawsuits were filed against Stephen Ehrlich, former CEO of Voyager, by the CFTC and Federal Trade Commission on the very same day, accusing him of fraudulence and "registration failures", in relation to unregistered commodity pools through Voyager. The FTC managed to reach a preliminary settlement with Voyager, prohibiting the company from promoting, offering, or selling any service or product that might enable the investment, exchange, deposit or withdrawal of any assets, as per an October 12th statement. In relation to the settlement, Voyager and its associates acceded to a judgement of $1.65 billion, intended to refund clients throughout the bankruptcy proceedings. Commenting on the situation, CFTC Commissioner Caroline Pham stressed on the importance of continuous supervision of cryptocurrency firms to prevent misuse of clients' funds. Nevertheless, Pham expressed concern over the potential overstepping of CFTC's jurisdiction in discerning what qualifies as a commodity pool operator. On a different note, Voyager declared Chapter 11 bankruptcy in July 2022, indicating its potential liabilities range from $1 billion to $10 billion to over 100,000 creditors. The crypto brokerage firm initiated client withdrawals in June.
Published At
10/13/2023 5:19:03 AM
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