FDIC warns CEX.IO client funds are not insured

abdelaziz Fathi

The Federal Deposit Insurance Corporation (FDIC) has issued a cease-and-desist letter to Illinois-based crypto exchange CEX.IO to stop falsely claiming that its client funds are insured by the government.

The agency said that the exchange failed to distinguish the FDIC status of its own bank deposits and customers’ funds after a section of its website inaccurately states that “U.S. dollars held in your CEX.IO fiat currency wallet are FDIC-insured up to $250,000 per account.”

“No qualifications, clarifications or limitations are made in connection with this representation, and no insured depository institution or institutions (IDIs) are identified in connection with this statement,” the FDIC noted in its letter.

Under the Federal Deposit Insurance Act, it’s prohibited to use the FDIC’s name or logo to imply customer funds are government insured when they are not. The agency also has the authority to assess civil money penalties against anyone “implying that an uninsured product is FDIC–insured or knowingly misrepresenting the extent and manner of deposit insurance.”

The FDIC demanded that remove any statements or references anywhere that suggest the exchange is FDIC-insured and that any funds held in crypto by it are protected by FDIC insurance.

In a warning to CEX.IO, the FDIC mentioned misrepresentation of FDIC coverage and ordered the firm to remove such false and misleading statements about the FDIC-insured status.

The FDIC ramped up its efforts to police crypto firms that may be misleading investors on whether their funds enjoy a government backstop. It has issued cease and desist letters to five crypto firms, including bankrupt FTX and Voyager Digital, to stop making similar misleading statements. Later, the FDIC urged banks dealing with crypto companies to ensure that their customers are aware of what types of assets are government-insured.

The New York Department of Financial Services (NYDFS) is also investigating Winklevoss-owned exchange Gemini over its communications with Earn customers which contained ambiguous terminology that their GUSD stablecoin deposits are protected by FDIC.

FDIC Chairman Martin J. Gruenberg commented on an observed increase in these kinds of misrepresentations and their impacts on consumers. “These practices not only harm those who are targeted with the false promise of deposit insurance, but, if left unchecked, could also undermine confidence in the FDIC, FDIC-insured banks, and the U.S. banking system.”

CEX.IO holds a money service business (MSB) status with the Financial Crimes Enforcement Network (FinCEN), which allows a company to act as a money transmitter in the United States with a stringent independent annual audit.

Since 2015, CEX.IO’s trading services have been available in the US with a growing number of Money Transmitter Licenses under their belt.

Read this next

Retail FX

Banxso announces 8.7% interest rate on deposits in South Africa

“With Banxso, they can enjoy the benefits of both worlds – earning competitive interest and having the freedom to trade, all within the same platform.”

Industry News

FINRA to publish transaction details in U.S. Treasury securities

“Consistent with our longstanding practice, FINRA is introducing greater transparency in a calibrated and careful manner, benefiting liquidity and resilience in this critical market while also mitigating potential information leakage concerns.”

Institutional FX

OpenYield launches “cheap and easy” fixed income trading for brokers

“We’re on a mission to make bonds cheap and easy to trade, and are excited about the opportunity to build generational capital markets infrastructure.”

Digital Assets

Sumsub and Mercuryo publish a guide for VASPs: “Mastering Travel Rule Compliance”

“At Sumsub, we’ve concentrated our efforts on filling the gap in understanding the complexity of Travel Rule regulation and helping organizations find the best solution to stay safe and compliant while minimizing costs and avoiding potential risks of non-compliance. This guide we created with Mercuryo, our trusted partner, is the ultimate navigation tool all VASPs can consult.”

Digital Assets

Bitget Wallet Leads with Record Swap Volume & New Crypto Innovations

This week, Bitget Wallet achieved a milestone by surpassing Metamask with a record 388,757 Swap order transactions, securing the global lead. The significant 7-day trading volume, almost 68,000 more than its rival, underscores its liquidity and user trust. This robust activity signals Bitget Wallet’s prominent role and reliability in the dynamic crypto market.

Digital Assets

Embarking on a Digital Currency Journey

Imagine you’ve stumbled upon a treasure map, leading you to untold riches hidden in the vastness of the internet. Instead of gold coins and jewel-encrusted goblets, this treasure comes in the form of digital currencies, the modern-day loot coveted by many.

Reviews

Traders Union Experts Share The Trading Analyst Review For 2024

Navigating options trading in rapidly shifting markets poses a considerable challenge. This is where options trading alert services become invaluable. They aid traders in keeping abreast of evolving opportunities and market trends. In this assessment, Traders Union experts scrutinize The Trading Analyst alert service to ascertain its efficacy. 

Digital Assets

BlockDAG’s Presale Achieves $9.9M: Aiming For A 5000-Fold ROI As Cardano’s Price Rises And Fantom Launches Sonic

Explore Cardano’s surge, Sonic’s efficiency, and why BlockDAG’s growth makes it the top crypto choice. A deep dive into the future of blockchain investments.

Digital Assets

US, UK probe $20 billion Tether transfers tied to Russian exchange.

U.S. and UK authorities are investigating the movement of $20 billion in the USD-pegged stablecoin tether (USDT) through Moscow-based exchange Garantex.

<