The Commodity Futures Trading Commission (CFTC) has taken legal action against Stephen Ehrlich, co-founder of Voyager Digital, charging him with fraud and failure to register with the agency, media reports said.
According to the CFTC, Ehrlich and his firm engaged in deceptive practices, including providing false information to customers as Voyager faced financial challenges. CFTC Enforcement Director Ian McGinley asserted that, despite public assurances of responsible management of customers’ digital asset commodities, Ehrlich and Voyager took perilous risks with customer assets, contributing to the eventual bankruptcy of Voyager and substantial losses for customers.
The alleged fraudulent activities spanned from February to July 2022, during which Ehrlich purportedly misrepresented the safety and financial health of the Voyager digital asset platform.
Ehrlich enticed customers with promises of high-yield returns, reaching up to 12%, and to generate these returns, he and Voyager allegedly pooled customer funds and transferred billions of dollars’ worth of digital asset commodities as “loans” to high-risk third parties.
In a parallel move, the Federal Trade Commission (FTC) announced a settlement with Voyager, permanently prohibiting it from handling consumer assets. The FTC also charged Ehrlich with false statements about the insurance coverage of customer accounts by the Federal Deposit Insurance Corporation.
Ehrlich has not agreed to a settlement with the FTC, indicating that the case against him will proceed in federal court. The CFTC’s action follows a report by Bloomberg News, revealing that agency investigators concluded Ehrlich violated rules preceding Voyager’s bankruptcy.
CFTC staff recommended internally that Ehrlich be accused of breaking derivatives rules by misleading customers about the safety of their assets.
Ehrlich, in response to these developments, expressed deep concern for the losses suffered by Voyager’s customers and creditors, attributing the situation to broader industry challenges.
Voyager filed for Chapter 11 bankruptcy over a year ago amid industry volatility, notably triggered by the collapse of the Terra blockchain in May 2022, which wiped $40 billion in value off the market.
