U.S. regulators have filed a lawsuit against Stephen Ehrlich, the former CEO and co-founder of Voyager Digital Ltd, alleging that he and the crypto lending platform misled customers about the safety of their assets and engaged in “excessive risks” that ultimately led to the company’s collapse.
The U.S. Commodity Futures Trading Commission (CFTC) accused Ehrlich of committing fraud between February and July 2022. According to the CFTC, Ehrlich and Voyager assured customers that their digital assets, at times valued at over $2 billion, were safe on their platform. However, behind the scenes, they took reckless risks by lending to high-risk counterparties, including four firms that have since gone bankrupt.
Voyager was one of several crypto companies that faced financial difficulties in 2022, along with Celsius Network and BlockFi, due to the sharp decline in cryptocurrency prices amid changing interest rates and deteriorating macroeconomic conditions.
Ehrlich issued a statement expressing his outrage and deep dismay at the allegations, emphasizing that Voyager’s management team had maintained the platform in compliance with existing regulatory structures and worked closely with regulators. Voyager did not provide a comment in response to the lawsuit.
The CFTC claimed that Voyager owed U.S. customers more than $1.7 billion.
In a separate action, the Federal Trade Commission (FTC) announced a permanent ban on Voyager from handling consumer assets. The FTC also filed a lawsuit against Ehrlich for making false claims that customers’ accounts were insured by the Federal Deposit Insurance Corporation (FDIC) and were secure, even as the company faced bankruptcy.
The FTC’s complaint also involves Ehrlich’s wife, Francine Ehrlich, as a relief defendant, though she could not be reached for comment.
Voyager, based in New Jersey, filed for bankruptcy in July after suspending customer withdrawals and issuing a notice of default to Singapore-based crypto hedge fund Three Arrows Capital for failing to make payments on a crypto loan.
By FCCT Editorial Team
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