{"id":12830,"date":"2022-08-21T15:18:10","date_gmt":"2022-08-21T15:18:10","guid":{"rendered":"https:\/\/scienceandnerds.com\/2022\/08\/21\/ftxs-money-isnt-insured-fdic-says\/"},"modified":"2022-08-21T15:18:12","modified_gmt":"2022-08-21T15:18:12","slug":"ftxs-money-isnt-insured-fdic-says","status":"publish","type":"post","link":"https:\/\/scienceandnerds.com\/2022\/08\/21\/ftxs-money-isnt-insured-fdic-says\/","title":{"rendered":"FTX\u2019s money isn\u2019t insured, FDIC says"},"content":{"rendered":"

Source: https:\/\/www.theverge.com\/2022\/8\/20\/23314401\/ftx-money-isnt-insured-fdic-sam-bankman-fried-crypto-cease-and-desist<\/a>
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The Federal Deposit Insurance Corporation (FDIC)<\/a> slapped the Sam Bankman-Fried-owned cryptocurrency exchange FTX with a cease-and-desist order over \u201cfalse and misleading statements\u201d that suggest its assets are FDIC-insured. The FDIC doesn\u2019t cover stocks<\/a> or crypto, and only safeguards funds held in insured bank accounts.<\/p>\n

In a letter to the exchange<\/a>, the FDIC points to a now-deleted tweet from FTX president Brett Harrison, which states \u201cdirect deposits from employers to FTX US are stored in individually FDIC-insured bank accounts in the users\u2019 names.\u201d The referenced tweet also says that \u201cstocks are held in FDIC-insured and SIPC [Security Investor Protection Corporation]-insured brokerage accounts.\u201d The FDIC claims this falsely represents that FTX and the funds invested by users are FDIC-insured when they\u2019re really not. <\/p>\n

While not flagged in the FDIC\u2019s letter, users have also pointed out another potentially misleading tweet<\/a> from Harrison that says \u201ccash associated with brokerage accounts is managed into FDIC-insured accounts\u201d at FTX\u2019s \u201cpartner bank.\u201d<\/p>\n

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We really didn\u2019t mean to mislead anyone, and we didn\u2019t suggest that FTX US itself, or that crypto\/non-fiat assets, benefit from FDIC insurance. I hope this provides clarity on our intentions. Happy to work directly with the FDIC on these important topics.<\/p>\n

\u2014 Brett Harrison (@Brett_FTX) August 19, 2022<\/a>\n<\/p><\/blockquote>\n<\/div>\n

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1) Clear communication is really important; sorry!<\/p>\n

FTX does not have FDIC insurance (and we’ve never said so on website etc.); banks we work with do. We never meant otherwise, and apologize if anyone misinterpreted it. https:\/\/t.co\/MHMSMDE8Le<\/a><\/p>\n

\u2014 SBF (@SBF_FTX) August 19, 2022<\/a>\n<\/p><\/blockquote>\n<\/div>\n<\/div>\n

Harrison has since issued a response to the FDIC\u2019s letter<\/a>, explaining that FTX \u201creally didn\u2019t mean to mislead anyone,\u201d and claims FTX \u201cdidn\u2019t suggest that FTX US itself, or that crypto\/non-fiat assets, benefit from FDIC insurance.\u201d FTX CEO and founder Bankman-Fried provided further clarification<\/a> as well, stating that while \u201cFTX does not have FDIC insurance,\u201d the banks it does business with do. Bankman-Fried adds that it may \u201cexplore potential ways that individual accounts using direct deposit… could, in the future, be used to further protect customers,\u201d and that FTX \u201cwould be excited to work with the FDIC on that.\u201d<\/p>\n

As noted by the FDIC, the Federal Deposit Insurance Act (FDI Act) prohibits companies from \u201dimplying that their products are FDIC\u2013insured by using \u2018FDIC\u2019 in the company\u2019s name, advertisements, or other documents.\u201d The FDIC is giving FTX 15 days to provide confirmation that it has removed or corrected any alleged misrepresentations. In addition to FTX, the FDIC doled out cease-and-desist warnings to four other companies, including Cryptonews.com, Cryptosec.info, SmartAsset.com, and FDICCrypto.com.<\/p>\n

The FDIC declined to comment beyond the contents of its letter, and FTX didn\u2019t immediately respond to The Verge<\/em>\u2019s request for comment.<\/p>\n

Like Robinhood, FTX has started offering both traditional stock<\/a> and crypto trading options. In May, crypto billionaire Bankman-Fried disclosed a 7.6 percent stake in Robinhood<\/a>, and he\u2019s reportedly looking into purchasing the trading platform<\/a>. <\/p>\n

Even with the so-called crypto winter driving several crypto<\/a> companies<\/a> to bankruptcy<\/a>, FTX and Bankman-Fried\u2019s crypto trading firm Alameda Research have somehow managed to stay afloat. Bankman-Fried has extended lines of credit to numerous struggling crypto firms to help them weather the uncertain economy, and told Reuters<\/em> he has \u201ca few billion\u201d more<\/a> for future bailouts. According to documents obtained by CNBC<\/a>, FTX brought in $1.02 billion in revenue in 2021 and $270 million in the first quarter of 2022.<\/p>\n