FDIC warns OKCoin about deceiving customers with protection claims

OKCoin faces accusations of making false claims on three separate instances that is FDIC-insured

article-image

Dennis Diatel/Shutterstock, modified by Blockworks

share

The Federal Deposit Insurance Corporation (FDIC) slammed crypto exchange OKCoin with a demand to halt misleading claims about being insured.

Under the Federal Deposit Insurance Act, it is against the law to misrepresent uninsured deposits as insured or provide false information about the coverage.

In a letter to OKCoin CEO Hong Fang on Thursday, the FDIC pointed out three instances where the exchange was accused of making false claims. The agency has the authority to issue cease-and-desist orders and impose civil penalties for violations.

A blog from 2020 shows San Francisco-based OKCoin saying that it is “licensed across the US with FDIC insurance on OKCoin accounts” as one of the top 10 reasons to choose its platform.

On the website, they also claimed that the Provenance blockchain’s HASH token on OKCoin had gained regulatory acceptance from entities including the FDIC.

Further, the FDIC also cited a Twitter post where OKCoin’s chief marketing officer and its affiliated exchange OKX claimed that “if you are in the US, we offer FDIC insurance on USD deposits.”

“In fact, OKCoin is not FDIC-insured and the FDIC does not insure non-deposit products,” the letter said. 

“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 agency also mentioned that it does not endorse or support any specific blockchains.

An OKCoin spokesperson told Blockworks that the platform is aware of this matter and is taking action to assess the FDIC’s statements.

“A core principle at Okcoin is to respect applicable laws and regulations, and we remain committed to collaborating with stakeholders including regulators whenever possible,” they added.

FDIC protection excludes crypto custodians and exchanges

Several other companies, including Voyager and FTX US, have also earlier received cease and desist letters from the FDIC.

The FDIC has clarified in the past that its protections kick in when an insured bank fails, but they don’t cover crypto custodians, exchanges, or wallet providers.

Crypto platforms aren’t the only ones without FDIC insurance. Apps like Venmo, Cash App, and PayPal are also deemed risky for storing cash.


Start your day with top crypto insights from David Canellis and Katherine Ross. Subscribe to the Empire newsletter.

The Lightspeed newsletter is all things Solana, in your inbox, every day. Subscribe to daily Solana news from Jack Kubinec and Jeff Albus.

Tags

Upcoming Events

Salt Lake City, UT

WED - FRI, OCTOBER 9 - 11, 2024

Pack your bags, anon — we’re heading west! Join us in the beautiful Salt Lake City for the third installment of Permissionless. Come for the alpha, stay for the fresh air. Permissionless III promises unforgettable panels, killer networking opportunities, and mountains […]

recent research

Screenshot 2024-05-23 091855.png

Research

Bitcoin L2s aim to boost scalability while preserving decentralization and security, unlocking a better user experience, and new avenues for Bitcoin-powered innovations. However, no existing Bitcoin L2 leverages the full security of Bitcoin.

article-image

Solana validators voted in favor of a proposal that would send 100% of priority fees to validators

article-image

In November, an iteration of the survey found that 34% of respondents were paying attention to crypto, but that figure has since jumped to 41%

article-image

The sentencing of former FTX exec Ryan Salame is the first among those who pleaded guilty to crimes related to the exchange’s collapse

article-image

BlackRock’s iShares Bitcoin Trust is on the cusp of passing Grayscale’s GBTC in assets under management

article-image

Sponsored

The convergence of AI and blockchain on Polkadot represents a groundbreaking opportunity for investors and developers alike

article-image

The company is making public a previously private offer rejected by Bitfarms’ board of directors last month