InfoBytes Blog
FDIC orders neobank to stop fraudulent deposit insurance representations
On March 27, the FDIC sent a letter to a neobank demanding that it stop making false or misleading representations about FDIC deposit insurance and take immediate corrective action to address these statements. The FDIC maintained that the neobank and/or its officers made false and misleading statements in English and Spanish suggesting that it is FDIC-insured and that FDIC insurance will protect customers’ cryptocurrency assets. The FDIC explained in the letter that not only is the neobank not FDIC-insured, the FDIC does not insure crypto assets. “By not distinguishing between US-dollar deposits and crypto assets, the statements imply FDIC insurance coverage applies to all customer funds (including crypto assets),” the letter said. Moreover, the neobank also failed to “clearly and conspicuously identify an insured deposit institution for placement of deposits,” the FDIC said in its announcement. Under the Federal Deposit Insurance Act, the announcement added, persons are prohibited “from representing or implying that an uninsured product is FDIC-insured or from knowingly misrepresenting the extent and manner of deposit insurance.” The FDIC requested a response within 15 days.