The US Federal Trade Commission (FTC) is investigating Voyager Digital for deceptive and unfair marketing regarding crypto services offered in the past.
Voyager Digital filed for bankruptcy in July 2022, shortly after Celsius and as a result of the implosion of the Terra/Luna ecosystem, and in January 2023 its sale to Binance was announced.
Summary
Voyager Digital, the crypto company accused of deceptive marketing
Voyager Digital Holdings was a creditor of Three Arrows Capital (3AC), the crypto fund that went bankrupt in June 2022, and due in part to uncollectible claims against 3AC, it also went into serious financial distress.
Specifically, 3AC failed to pay a $25 million installment, out of a total $350 million loan, thus sending Voyager into trouble.
Because of this failure, Voyager was then forced to suspend withdrawals, as it had major liquidity problems at that point that could not be solved.
The company offered returns on deposits in cryptocurrencies by giving these on loan against payment of interest, as it did with 3AC, for example.
However, according to the FTC, some acts and practices of the company’s debtors, employees, directors and officers could be construed as “unfair marketing of cryptocurrency to the public.”
The sale to Binance
The issue was raised specifically in connection with Binance‘s attempt to purchase what remains of the company.
In January, bankruptcy judge Michael Wiles had approved the plan by which Voyager’s debtors would sell the assets to Binance.US for more than $1 billion.
However, the FTC filed an objection to this plan, stating that some of the parties involved in Voyager’s bankruptcy proceedings should not be exempt from charges of “false representation” and “false pretenses.”
In other words, the plan to acquire Binance is likely to blow up if the FTC’s objections are upheld, or at any rate be temporarily suspended.
Thus, this is at the same time both an attempt to shed light on the legal terms of the plan and a further indictment of Voyager.
Indeed, the allegations of deceptive marketing are aimed at Voyager’s very employees, directors and officers, although no further details are given in the document filed by the FTC in the bankruptcy court for the Southern District of New York.
Deceptive marketing
In the US, federal law protects consumers from companies that want to deceive or take advantage of them. The FTC is precisely the agency responsible for policing any violations of these laws.
Specifically, the FTC monitors advertising for truthfulness, in other words: not deceptive, not unfair, and with evidence to support the claims it makes.
Thus specifically it is about what is said to customers, or potential customers, to persuade them to buy.
An advertisement is considered deceptive if it contains or omits information so as to mislead consumers acting rationally under the circumstances, such as by withholding important information about the decision to buy or use the product.
An advertisement or business practice is considered unfair, or improper, if it is likely to cause substantial harm to the consumer which he or she would not reasonably be able to avoid, and which is not outweighed by adequate benefits.
Thus, these are purely legal issues, but they have a significant impact on customers’ shopping experience.
For example, the FTC focuses on those advertisements that make it difficult for consumers to understand whether they are stating the truth or not.
The allegations made against Voyager in this regard could relate precisely to customers’ inability to understand whether what they were being promised was realistic or not. This, however, at present is only a hypothesis.
It is worth mentioning that it was not only Voyager Digital that promised crypto gains while hiding the high underlying risks of its services, given that many sellers of such services passed them off as safe knowing full well that they were not.
