U.S. regulators have targeted former Voyager Digital CEO Steve Ehrlich with lawsuits claiming he engaged in fraud and deliberately misrepresented his customers’ government protections.

The Commodity Futures Trading Commission (CFTC) and Federal Trade Commission (FTC) announced related actions against Ehrlich on Thursday, with the CFTC also including in its court filing that Circle's USDC stablecoin and bitcoin as commodities.

The CFTC accused Ehrlich of defrauding customers by misleading them about the strength of the company and doing business without proper registrations. The FTC said he lied about customers’ funds being protected by the Federal Deposit Insurance Corp.

“Ehrlich and Voyager lied to Voyager customers,” said Ian McGinley, the CFTC’s enforcement director, in a statement about the suit, which calls for restitution, penalties and industry bans for the former executive. “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.”

However, one of the agency's commissioners, Caroline Pham, argued the CFTC's position that the company should have registered as a commodity pool operator is a bad interpretation of the law.

The enforcement action's definition of commodity pools “would seem to include commonplace lending activity—like taking deposits and providing loans,” she said in a statement on Thursday. “Such an interpretation is an overreach beyond our statutory authority and would disrupt well-established legal and regulatory frameworks for lending to institutions and consumer finance.”

The CFTC also took the opportunity to put on the record assets it considers commodities – as the agency has done in other recent cases, saying “certain digital assets are ‘commodities,’ including BTC, USDC, and others.”

The FTC also settled with the company in an agreement that permanently bans Voyager from handling customers’ assets, hitting it with a $1.65 billion judgment that is suspended to allow the firm to continue its liquidation to pay back its customers.

“This action reminds companies and individuals: Don’t play fast and loose with claims about FDIC insurance,” said Samuel Levine, director of the FTC’s Bureau of Consumer Protection, in a statement.

After Voyager collapsed in July 2022, the crypto lender first negotiated a doomed deal to sell to FTX, and then another arrangement for sale to Binance fell apart. Former Voyager customers may not recover more than 36% of their assets, according to estimates.

UPDATE (October 12, 2023, 18:49 UTC): Adds comment from CFTC's Caroline Pham.

UPDATE (October 12, 2023, 19:12 UTC): Adds CFTC's claim of BTC and USDC as commodities.

Regulations Voyager Digital Stephen Ehrlich CFTC Commodity Futures Trading Commission Federal Trade Commission Lawsuit Enforcement

Jesse Hamilton

Jesse Hamilton is CoinDesk's deputy managing editor on the Global Policy and Regulation team, based in Washington, D.C. Before joining CoinDesk in 2022, he worked for more than a decade covering Wall Street regulation at Bloomberg News and Businessweek, writing about the early whisperings among federal agencies trying to decide what to do about crypto. He’s won several national honors in his reporting career, including from his time as a war correspondent in Iraq and as a police reporter for newspapers. Jesse is a graduate of Western Washington University, where he studied journalism and history. He has no crypto holdings.