Former Voyager Digital CEO, Stephen Ehrlich, is now facing simultaneous legal actions initiated by two major US regulatory bodies, the Commodity Futures Trading Commission (CFTC) and the Federal Trade Commission (FTC). The lawsuits filed by the CFTC and FTC allege serious allegations against Ehrlich, including fraud and regulatory violations.
Ehrlich and Voyager lied to their clients.
Ian McGinley, CFTC Enforcement Director
The formal complaint filed by the CFTC, in the US District Court for the Southern District of New York, alleges both fraud and registration failures related to Voyager’s operations, specifically an unregistered “commodity pool.” Ian McGinley, the CFTC’s Director of Enforcement, criticized Ehrlich and Voyager’s actions, citing their “shockingly reckless” risks that resulted in Voyager’s insolvency and subsequent client losses. McGinley further highlighted the deception surrounding Voyager’s true tax position as their business outlook dimmed.
Meanwhile, the FTC’s actions targeted not only the company’s misleading claims about the security of its offerings, but also Ehrlich’s personal involvement. It was alleged that Ehrlich made false representations, claiming that FDIC insured Voyager’s deposits in USD Coin. Additionally, the FTC highlighted Ehrlich’s suspicious transfer of a significant sum from Voyager to his wife, Francine Ehrlich, implicating her as a relief defendant in their lawsuit. However, the FTC reached a settlement agreement with Voyager, requiring a $1.65 billion payment and imposing a permanent ban on the firm from managing consumer assets.
The Broader Context
This legal action against Ehrlich should be viewed in the context of Voyager’s financial turmoil. The crypto firm sought Chapter 11 bankruptcy protection in 2022 due to broader crypto market setbacks. However, in a subsequent development, Voyager’s client repayment plan was approved by the bankruptcy court.
These lawsuits against Ehrlich and Voyager are indicative of broader regulatory crackdowns on crypto entities. The CFTC and FTC have ongoing litigations against several industry giants, highlighting the challenges and scrutiny that the crypto industry is currently facing.