CFTC files a fraud lawsuit against Voyager’s former CEO, Stephen Ehrlich
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The US Commodity Futures Trading Commission (CFTC) recently filed a lawsuit in the US District Court for the Southern District of New York, against Stephen Ehrlich.
Ehrlich is the former CEO of several entities that have since gone bankrupt, including Voyager Digital and Voyager Digital holdings, collectively known as Voyager. According to the complaint, Ehrlich is charged with fraud and registration failures tied to the Voyager digital asset platform, as well as Voyager’s operation of an unregistered commodity pool.
CFTC claims that Voyager and its former CEO tricked users into buying digital asset commodities
The US regulator claims that Voyager’s ex-CEO used the company to falsely promote the platform as a safe haven, promising users the ability to earn high yields. The goal was to encourage users to buy and store digital asset commodities.
CFTC’s director of enforcement, Ian McGinley, stated that Ehrlich and Voyager both lied to the customers. “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. When their business began to collapse, they continued lying to their customers, concealing Voyager’s true financial health. Amplifying their fraud, Ehrlich and Voyager broke their trust with customers while acting in capacities that required CFTC registration, which they failed to obtain.”
Ehrlich responded to the allegations with a statement of his own, saying that the talented management team at Voyager created and maintained the platform in full compliance with the existing laws. He added that the team consistently communicated with appropriate regulators.
However, the CFTC claims that it wants restitution, disgorgement, permanent trading and registration bans, civil monetary penalties, and a permanent injunction against any further violations of the CFTC regulations and the Commodity Exchange Act (CEA).
How did the scheme work?
The regulator stated that its investigation found that Ehrlich and Voyager engaged in a scheme to defraud customers, which is presumably started in February 2022 and lasted until July of the same year. During this time — and possibly for an even longer period — Voyager and its CEO at the time misrepresented the safety and financial health of the digital asset platform.
The CFTC went on to say that both the company and its ex-CEO used publicly available posts on social media and their website to present Voyager’s platform as safe haven for digital assets in a market that is otherwise volatile and risky. As part of the scheme, they promised users high-yield returns of 12% on certain asset commodities that the platform was offering.
The scam pooled customer assets stored on the platform, transferring billions of dollars in customers’ digital asset commodities as loans to high-risk third parties.
On top of that, Ehrlich and Voyager transferred over $650 million in customer funds to a digital asset hedge fund on an unsecured basis in early 2022. The regulator also says that they were aware of the fact that the fund would generate returns fo Voyager by pooling its investment and trading commodity interests.
However, Ehrlich did not even register as an associated person of a CPO, while he did solicit members of the public to contribute to the pool.
