Benzinga - The U.S. Commodity Futures Trading Commission (CFTC) has filed a civil lawsuit against Stephen Ehrlich, the ex-CEO of the defunct Voyager Digital entities.
The lawsuit alleges that Ehrlich engaged in fraud and failed to register with the CFTC, misleading customers about the safety of the Voyager digital asset platform and its operations.
The unfolding case is expected to be a major point of discussion at Benzinga's Future of Digital Assets conference on Nov. 14, where industry experts will weigh in on the implications of such high-profile cases for the broader digital asset sector.
According to the CFTC's complaint, Ehrlich, alongside Voyager, falsely promoted the platform as a "haven" promising high-yield returns, attracting customers to invest and store their digital assets.
Ehrlich and Voyager are alleged to have pooled customer assets, transferring billions in "loans" to high-risk third parties.
One such transaction in early 2022 saw over $650 million in customer assets transferred to a digital assets hedge fund known as 'Firm A'. This move was executed without proper due diligence and required CFTC registration, the agency alleges.
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"Ehrlich and Voyager lied to Voyager 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," said CFTC Director of Enforcement, Ian McGinley.
The lawsuit states that instead of providing the promised safety, Ehrlich and Voyager moved customer digital assets to risky entities, such as 'Firm A', to sustain the high returns used to attract and retain customers.
Voyager's attempt to recall its customer assets from 'Firm A' in June 2022 was met with default, causing severe liquidity issues for Voyager.
Despite these challenges, Ehrlich continued to publicly assure customers of their assets' safety with Voyager.
This culminated in Voyager filing for bankruptcy on July 5, 2022, leaving a debt of over $1.7 billion to its U.S. customers.
The CFTC's lawsuit seeks restitution, disgorgement, civil monetary penalties, and a permanent injunction against further violations.
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Disclosure: Benzinga CEO Jason Raznick is a member of the unsecured creditor committee in the Voyager Digital bankruptcy case.
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