Misleading Crypto Insurance Disclosure Concerns
FDIC LEGAL DIVISION Federal Deposit Insurance Corporation
December 21, 2023
Via Overnight Mail
XXXXX
RE: Disclosure Concerns Pursuant to Section 18(a)(4) of the Federal Deposit Insurance Act
Dear XXXXX,
I am an attorney in the Legal Division of the Federal Deposit Insurance Corporation (FDIC). As part of its responsibilities, the FDIC reviews statements that make representations about deposit insurance.
Provisions in the Federal Deposit Insurance Act, 12 U.S.C. § 1828(a)(4) (Section 18(a)(4)), and its implementing regulation, 12 C.F.R. Part 328, Subpart B (Part 328), prohibit any person from representing that an uninsured financial product is insured or from knowingly misrepresenting the extent or manner in which a deposit or obligation is FDIC-insured under the Act, whether by making affirmative statements or by omitting material information. Under Part 328, no person may represent or imply that any uninsured financial product is insured or guaranteed by the FDIC as part of an advertisement, solicitation, or other publication or dissemination. See 12 C.F.R. 328.102(a)(2). Further, pursuant to Part 328, a statement regarding deposit insurance would be deemed to omit material information if the absence of such information could result in a reasonable consumer being unable to understand the extent or manner of deposit insurance provided. See generally 12 C.F.R. 328.102(b). For example, under Part 328, it is a material omission for a non-insured entity that advertises deposit insurance to fail to identify the insured depository institution(s) with which the representing party has a direct or indirect business relationship for the placement of deposits and into which consumer's deposits may be placed. See 12 C.F.R. 328.102(b)(5).
We would like to bring to your attention certain statements on the XXXXX website, XXXXX advertises, XXXXX XXXXX XXXXX a reasonable consumer may be misled to believe that their stock or crypto rewards earned through the XXXXX are FDIC-insured. FDIC deposit insurance does not cover stock or crypto rewards and only covers funds in accounts at an insured depository institution (IDI) in the event of such institution’s failure.
Furthermore, within that advertisement, XXXXX does not identify the IDI where consumers’ funds may be placed. Although the name of the IDI is identified on the separate XXXXX Agreement, that disclosure is separate and distant from the deposit insurance representation on the XXXXX.
www.fdic.gov
FDIC
LEGAL DIVISION
Federal Deposit Insurance Corporation
webpage. The name of the IDI where consumers’ funds may be placed is necessary for a consumer to understand the extent or manner of deposit insurance provided.
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Based on the foregoing, we request that you revise your websites to address the identified concerns regarding FDIC deposit insurance. Please provide confirmation that you have addressed the above concerns to my attention by January 10, 2024. Alternatively, if you believe that the representations made are accurate, please provide the supporting information to me.
Should you have any questions about the contents of this letter, please contact me at XXXXX@FDIC.gov.
Sincerely,
Mara A. Strier
Counsel
Administrative Enforcement and Investigation Unit
XXXXX@FDIC.gov
Legal Division
550 17th Street NW, Washington, D.C. 20429-9990
www.fdic.gov
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