US Regulator Sues Former Voyager Digital CEO For Fraud And Registration Failures

The Commodity Futures Trading Commission (CFTC), the independent government agency in charge of regulating the U.S. derivatives markets, including futures, options, and swaps, filed a lawsuit against the now-bankrupt cryptocurrency brokerage company Voyager Digital and its CEO Stephen Ehrlich for fraud and registration failures.

The CFTC alleged that Ehrlich and Voyager Digital defrauded customers by making them believe that the crypto brokerage firm is a "safe haven" to buy and store assets, with its CEO promising high-yield returns as high as 12%.

"The complaint charges Ehrlich with fraud and registration failures in connection with the Voyager digital asset platform and Voyager's operation of an unregistered commodity pool," the CFTC said, adding, "Ehrlich and Voyager falsely touted the Voyager platform as a 'safe haven' to earn high-yield returns to induce customers to purchase and store digital asset commodities."

It was reported last week that the CFTC was already considering taking enforcement action against Ehrlich after conducting an investigation into the now-bankrupt crypto lender, where the regulator allegedly uncovered that the crypto executive broke derivatives regulations prior to the collapse of the business, leading to its bankruptcy filing.

At the time, Ehrlich was "angered and perplexed" by the regulator's potential civil claims, calling the allegations unfounded and underlining that he was just a "scapegoat for the bad actions of others at different companies."

The former Voyager digital CEO also noted, "These allegations appear to be one of those times where the referees are making new rules and calling foul after the game has ended. I look forward to being vindicated in court."

Voyager Digital's bankruptcy was considered one of the biggest events in 2022, which was among the crypto businesses that were significantly impacted by the colossal and noisy collapse of the then-crypto empire FTX, which was founded by Sam Bankman-Fried, who is currently undergoing his fraud trial.

"This is yet another CFTC action seeking to hold accountable a chief executive officer for his role in the fraudulent operation of a digital asset platform," CFTC Director of Enforcement Ian McGinley said.

"Ehrlich and Voyager lied to Voyager customers. While representing they would treat customers' digital asset commodities safely and responsibly, behind the scenes, they took shockingly reckless risks with their customers' assets, leading to Voyager's bankruptcy and huge customer losses," the director further said, adding, "When their business began to collapse, they continued lying to their customers, concealing Voyager's true financial health. Amplifying their fraud, Ehrlich and Voyager broke their trust with customers while acting in capacities that required CFTC registration, which they failed to obtain."

The lawsuit seeks "restitution, disgorgement, civil monetary penalties, permanent trading and registration bans, and a permanent injunction against further violations of the Commodity Exchange Act (CEA) and CFTC regulations."