Voyager Digital’s CEO faces two new lawsuits as CFTC, FTC take action

• Voyager Digital’s co-founder finds himself in double trouble with CFTC and FTC filing lawsuit against him
• The collapse crypto lending firm is also barred from ever handling customer funds as part of a deal with the FTC

The past few days have been rough for crypto founders, the ones that oversaw the collapse of their firm. The latest c-suite executive to make headlines is Voyager Digital CEO and co-founder – Steve Ehrlich.

Today, on 12 October, the Commodity Futures Trading Commission (CFTC) announced that it filed a complaint against Ehrlich. However, speculations of such an action hit headlines earlier this month.

The popular crypto-lending platform filed for bankruptcy in July 2022 and was among the first group that fell in the wake of Terra’s collapse. Post bankruptcy filing, the firm tried to repay its customers through a Binance buyout. However, the plan collapsed after multiple US regulatory interventions, resulting in self-liquidation.

CFTC details Voyager Digital CEO’s role in its collapse

The CFTC complaint against Ehrlich alleges fraud and “registration failures in connection with the Voyager digital asset platform and Voyager’s operation of an unregistered commodity pool“. The regulator also claimed that the CEO “falsely touted” that the lending platform was a “safe haven”, promising high returns. Notably, the returns went as high as 12% for certain cryptocurrencies.

Moreover, the regulator placed the entire blame for bad investment decisions on Ehrlich. The CFTC stated that the CEO took the decision to loan customer funds to “high-risk parties,” believing it would get high returns. It said,

“transferred over $650 million in customer digital asset commodities to Firm A (…) on an unsecured basis, with the understanding that Firm A would generate returns for Voyager by pooling Voyager’s investment and trading commodity interests. In so doing, Voyager operated the Voyager Pool and acted as a commodity pool operator (CPO) without the required CFTC registration.”

Additionally, the trouble doubled for Ehrlich as the Federal Trade Commission (FTC) also announced a lawsuit against Ehrlich today. The regulator also revealed that it has reached a settlement with the collapse crypto lending firm. As a result, the firm witnessed a ban “from handling consumers’ assets.” The settlement also included,

“the proposed settlement prohibits the companies from misrepresenting the benefits of any product or service; from making false, fictitious, or fraudulent representations to any customer of a financial institution in order to obtain or attempt to obtain their financial information; and from disclosing nonpublic personal information about consumers without their express consent.”

Meanwhile, the lawsuit against Ehrlich claimed that he misled customers. He claimed their accounts were FDIC-insured, which was false. In reality, it was the bank that the company used to store its money that was insured. This meant that customers would get their funds back only if the bank failed and not Voyager Digital. The FTC has also extended its lawsuit against his wife claiming,

“The FTC staff complaint alleges that Voyager and Stephen Ehrlich violated the FTC Act’s prohibition on deceptive practices and the Gramm-Leach-Bliley Act’s prohibition on obtaining a customer’s financial information (…) The complaint also alleges that Stephen Ehrlich transferred millions of dollars to his wife Francine, including funds that can be traced directly to the alleged unlawful conduct.”