The Federal Deposit Insurance Corporation (FDIC) has sent cease and desist letters to five companies demanding they stop making false and misleading statements about FDIC deposit insurance.
The FDIC is also demanding that the five companies take immediate corrective action to address the false or misleading statements, which involve a number of officers, directors and employees at each firm.
The FDIC has collected evidence that allegedly shows that each of the companies have stated or suggested that certain crypto–related products are FDIC-insured, or that stocks held in brokerage accounts are FDIC-insured.
FDIC Calls Out False Affiliation Claims
The companies involved are Cryptonews, Cryptosec, SmartAsset, FTX US and FDICCrypto. The FDIC have indicated that the false representations were made by the companies on their websites and social media accounts. As you can see from one of the company names, one of the firms has also registered a domain name that implies an affiliation with the FDIC which doesn’t actually exist.
The law is strongly 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. It is also prohibited to knowingly misrepresent the extent and manner of any deposit insurance a product has. In addition, companies are also prohibited from implying that their products are FDIC-insured by using the letters ‘FDIC’ in either their company name, their advertisements, or any other documents.
The FDI Act authorizes the FDIC to enforce these prohibitions against any person or entities, such as the aforementioned five companies.
FDIC’s Cease and Desist Letter
The stern letter sent by the FDIC to Cryptonews read: “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, concerning FDIC deposit insurance in violation of section 18(a)(4) of the Federal Deposit Insurance Act (FDI Act), 12 U.S.C. & 1828(a)(4), and its implementing regulation, 12 C.F.R. Part 328, Subpart B (Part 328). We hereby demand that you cease and desist, and take immediate corrective action to address these false and misleading statements, as more fully set forth below.
“Section 18(a)(4) of the FDI Act, 12 U.S.C. & 1828(a)(4), and Part 328 prohibit any person from using the FDIC’s name or logo, or similar terms, to represent or imply that an uninsured deposit liability, obligation, certificate, or share is insured, or from knowingly misrepresenting the extent and manner in which a deposit liability, obligation, certificate or share is insured under the FDI Act. The FDIC has the authority to enforce these provisions against any person or entity. Enforcement tools available to the FDIC include the authority to issue cease-and-desist orders and to assess civil money penalties for violations of Section 18(a)(4) and Part 328.”
The corrective actions include removing all mentions of the FDIC that could imply affiliation or endorsement.
What is FDIC Deposit Insurance?
FDIC deposit insurance is a protection for customers in the event of the failure of an FDIC-insured bank. To find out if an institution is legitimately FDIC-insured, first ask a representative of the institution or look for the FDIC sign at the institution’s location online or on-site. You can then use the FDIC’s BankFind tool.
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