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n February 15, 2023, the Federal Deposit Insurance Corporation (FDIC) announced that it has issued letters to four entities demanding that they cease and desist from certain statements they made about FDIC deposit insurance.
The entities consist of a cryptocurrency exchange, a non-bank financial provider, and two websites. The FDIC alleges that all four entities were suggesting or stating that they were FDIC-insured or that FDIC insurance would protect their customers’ cryptocurrency or investments in case of the entity’s failure. The FDIC noted that these types of statements are false and misleading because FDIC insurance does not protect all financial institutions.
In its letters to the four entities, the FDIC alleged violations of violation of section 18(a)(4) of the Federal Deposit Insurance Act (FDI Act), 12 U.S.C. § 1828(a)(4), and its implementing regulation, 12 C.F.R. Part 328, Subpart B. The FDI Act prohibits any institution who is not FDIC-insured from using FDIC’s name, logo, or any other indication. Additionally, when an entity claims that a product is insured by the FDIC, failure to identify the insured depository institution where the funds will go constitutes a material omission in violation of Part 328. The FDIC has the authority to enforce these provisions through assessment of civil money penalties or the issuance of cease-and-desist orders. The letters required each of the four entities to provide confirmation letters of their compliance within fifteen days of receipt.