With all the crypto companies that have fallen in recent times, it is very important to check where you have placed your capital and how much risk you run there. But that is not always so clear. Some crypto companies falsely claim that the money on exchanges is protected by the government, but in many cases that is not true. The US government is now issuing a warning to five companies.
Crypto is not insured!
Banks in the United States are part of the Federal Deposit Insurance Corporation (FDIC), which insures deposits of up to $250,000 per account holder. If a bank that is a member of this system goes bankrupt, the US government insures the amount in the accounts. This is the American version of the Dutch deposit guarantee scheme.
But crypto exchanges are not covered by this policy at all, the FDIC emphasizes in a press release. The institute has issued a written warning to five companies in the crypto sector. These are the companies below. The links are to the respective letters.
It should be emphasized that FTX US is the only trading platform, the rest are informative websites. In all letters, the FDIC emphasizes that the companies are making misleading claims about insured crypto assets and shares in broker accounts. That is not true, which is why the organization wants these companies to stop making these unfounded claims.
This notice will apply not only to companies that are very active in the United States, but also to companies that offer dollar trading pairs, for example, outside the US. It is also obvious that the European equivalents would apply similar measures if a European company were to make such a claim. The systems are very similar.
FTX CEO Sam Bankman-Fried Responds
on Twitter highlights FTX chief executive Sam Bankman-Fried (aka SBF) said his company never intended to claim that deposits on the trading platform are protected. He apologizes for the lack of clarity.
2) We’re also excited to explore potential ways that individual accounts using direct deposit (which we now support) could, in the future, be used to further protect customers, and would be excited to work with the FDIC on that, but to be clear FTX US isn’t FDIC insured.
— SBF (@SBF_FTX) August 19, 2022
He does say he has ideas for individual accounts that support direct deposits. FTX already offers this, but Bankman-Fried wants to explore the possibilities of insuring these accounts together with the FDIC. The bank accounts that FTX maintains itself at regular banks are protected via this system, but customers do not benefit from this.