The U.S. Federal Deposit Insurance Corporation (FDIC) has issued a cease-and-desist notice to Unbanked, Inc., a Georgia-based technology company that shuttered its operations in June. The FDIC alleges that the crypto firm made false and misleading claims about its insurance status, even after it had announced the cessation of its operations.
Unbanked’s Misleading Claims About FDIC Insurance
Unbanked, Inc., a company that provides crypto debit card services, is accused by the FDIC of falsely implying that financial products, such as cryptocurrencies, are insured by the FDIC. The FDIC has been vigilant in pursuing companies it believes are making such misleading claims.
The FDIC’s notice points out that Unbanked advertised the availability of FDIC insurance on its website, prominently placed above marketing material regarding checking accounts and the ability to ‘deposit, withdraw, and seamlessly trade between several crypto assets.’ The agency took issue with the lack of a disclaimer stating that the crypto assets are not FDIC insured or guaranteed.
Interestingly, Unbanked first learned about the cease-and-desist notice from Decrypt’s inquiry after the FDIC announced the notice on its official mailing list. This suggests that bureaucratic hurdles may have delayed the delivery of the notice to Unbanked Inc.
Unbanked’s Closure and the Fallout
In June, Unbanked announced that the company would be winding down its operations. It advised members to remove their assets from the site as soon as possible. The company shared a letter on Twitter on June 19, urging all Unbanked customers and those through its white-label programs to begin withdrawing all crypto and USD funds.
The decision to cease operations came after a $5 million investment failed to materialize. Unbanked stated, “We have not received those funds as of this moment. We are still optimistic that we will receive these funds; if we do—Unbanked will resume operations and be stronger than ever. However, the money doesn’t count until it’s in the bank.” The company also mentioned that it would continue to explore alternative funding sources.
Unbanked cited a challenging regulatory environment in the United States as a significant factor in its decision to cease operations. The company expressed hope that it could revive Unbanked or that another better-funded company could continue with its core mission.
FDIC’s Demands and Unbanked’s Future
The FDIC pointed to posts made by Unbanked on social media that the agency says claim being FDIC insured. An FDIC spokesperson told Decrypt, “A company’s intent to wind down operations doesn’t mean it has ceased operations,” adding that anything further would need to be addressed with FDIC general counsel.
The FDIC has demanded that Unbanked, Inc. immediately remove any statements suggesting that funds held in cryptocurrencies or other uninsured financial products are protected by FDIC insurance. The agency has given Unbanked 15 days to provide written confirmation that the firm has complied with the order. It also demands that Unbanked cease making such statements in the future.
This situation underscores the importance of clear and accurate communication about financial products, especially in the rapidly evolving world of cryptocurrencies. As regulatory bodies like the FDIC continue to monitor and enforce compliance, companies operating in this space must ensure they provide accurate information to their customers. The future of the Unbanked remains uncertain, but this case serves as a reminder of the regulatory challenges that crypto firms face.
The cease-and-desist order issued by the FDIC against Unbanked, Inc. highlights the critical importance of transparency and regulatory compliance in the cryptocurrency sector. While Unbanked’s future remains uncertain, the case serves as a stark reminder for other crypto firms about the potential consequences of misleading claims and the necessity of accurate communication about their financial products.