Report: Voyager Co-Founder Stephen Ehrlich May Face CFTC Action

Voyager Digital co-founder Stephen Ehrlich is reportedly facing potential enforcement action from U.S. regulators following investigations into the conduct of the bankrupt crypto lender.

Staff in the Commodity Futures Trading Commission (CFTC) enforcement division have concluded that Ehrlich broke derivatives regulations by misleading customers about the safety of their assets, Bloomberg reported Friday (Oct. 6), citing unnamed sources.

The division has recommended accusing Ehrlich of wrongdoing, and commissioners are currently voting on whether to approve an enforcement action against him, according to the report. If approved, the CFTC can seek fines and other penalties.

Ehrlich told Bloomberg that he was “angered and perplexed” by the potential action. “Day in and day out, Voyager worked closely with the relevant regulators,” he said. “These allegations appear to be one of those times where the referees are making new rules and calling foul after the game has ended. I look forward to being vindicated in court.”

Voyager’s bankruptcy in 2022 was a significant event in the crypto industry, along with the collapse of FTX, according to the report. The CFTC’s investigation into Voyager found that the company transferred hundreds of millions of dollars to high-risk companies, including crypto hedge fund Three Arrows Capital and FTX co-founder Sam Bankman-Fried’s Alameda Research.

Ehrlich is accused of not conducting proper due diligence on Three Arrows before lending the firm over $650 million worth of customers’ bitcoin and U.S. dollars, which was never repaid and contributed to Voyager’s downfall, the report said.

Separately, a settlement has been reached between Voyager’s plan administrator and the Federal Trade Commission (FTC) regarding claims that the company misrepresented the availability of Federal Deposit Insurance Corp. protection to its former customers, per the report. The FTC had opened an investigation into Voyager and its employees, directors and officers over alleged deceptive marketing of cryptocurrency to the public.

Voyager said in May that it was closing down following two failed attempts to sell itself. The announcement came 10 days after Binance.US walked away from a plan to purchase Voyager for $1 billion, giving no reason for its decision to terminate the deal.

Voyager originally filed for Chapter 11 bankruptcy protection in July 2022, saying it was “facing a short-term ‘run on the bank’” after a borrower defaulted on a $650 million loan.