CFTC, FTC Sue Ex-Voyager Digital CEO Stephen Ehrlich for Fraud

The former executive of the bankrupt crypto platform is accused of fraud, operating a massive commodity pool scheme and falsely claiming consumer deposits were FDIC insured.

The. U.S. Commodity Futures Trading Commission announced on Thursday that it is suing Stephen Ehrlich, the former CEO of the now-bankrupt crypto trading platform and custodian Voyager Digital. The CFTC accuses Ehrlich of fraud, registration failures, and operating an unregistered commodity pool. At the same time, the Federal Trade Commission (FTC) separately charged Ehrlich and Voyager with falsely claiming that consumer deposits were insured by the Federal Deposit Insurance Corporation (FDIC). 

The CFTC alleges that Ehrlich and Voyager falsely advertised the platform as a “safe haven” to earn high-yield returns to entice customers into purchasing and storing digital asset commodities on the platform. 

“Voyager’s reckless transfers led to its own demise,” wrote the CFTC in a filing with the U.S. District Court for the Southern District of New York.

The CFTC is seeking restitution, disgorgement, civil monetary penalties, permanent trading, and registration bans. 

“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,” said CFTC director of enforcement Ian McGinley in a press release. 

“Ehrlich and Voyager lied to Voyager customers,” he continued. “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. 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 CFTC alleges that from at least February 2022 through July 2022, Voyager (under the direction of Ehrlich) acted to defraud customers by misrepresenting the safety and financial health of the platform. To generate the income needed to pay the promised high-yield returns, Ehrlich and Voyager pooled customer assets and transferred billions of dollars worth of those assets as loans to high-risk third parties, including a digital assets hedge fund.