Voyager Digital marketed its deposit accounts for crypto purchases as safe, but customers might not be afforded the protection they thought because their assets weren’t insured by the Federal Deposit Insurance Corporation (FDIC) in the way they thought, The Wall Street Journal reported Thursday (July 7).
The report noted that Voyager had marketed the accounts as protected by the FDIC. But that wasn’t entirely the case, and the FDIC is investigating, WSJ reported.
This comes as Voyager’s brokerage and lending services have been caught in a tangle of downward-spiraling crypto prices, and the company has filed for bankruptcy.
Voyager has frozen all activity, including withdrawals on $350 million in customer deposits stored at the New York-based Metropolitan Commercial Bank. Voyager said customers would be able to access those funds from the bank after the completion of a “reconciliation and fraud prevention process.”
There’s currently no timeline on when that will happen. But the report said that the funds are likely to be paid in full. This is not necessarily true for Voyager’s crypto assets.
Voyager advertised that deposits in Metropolitan Commercial Bank were insured by the FDIC. But the FDIC insures accounts only in the case of a failure of a bank, not a company like Voyager.
Because of the confusion, the FDIC is now looking into the matter, a source told WSJ.
See also: Voyager Digital Bankruptcy Hints at Crypto’s Shaky Foundations
PYMNTS wrote that Voyager bankruptcy has spurred questions as to whether crypto will ever truly get a place within commerce. There are also questions about stablecoins as an alternative.
Voyager’s crisis happened because of a borrower defaulted on a $650 million loan. Voyager was usually a crypto broker service, but it also provided a lending arm, which offered double-digit interest on deposits, which were lent out to other borrowers.
PYMNTS wrote that there could be a question as to the problems with the bigger crypto world — beyond retail trading, there’s a bigger continuum of banking-type activities, in which the platforms take deposits and lend money against them.
PYMNTS research has found that 85% of merchants say they start accepting crypto because gaining new customers could be a factor. But volatility in that world has been causing more and more panic.
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