At least seven states are investigating Voyager Digital and New Jersey has slammed the Canadian firm with a cease and desist order which prohibits the crypto-asset broker-dealer from selling any more unregistered securities in the form of interest-earning cryptocurrency accounts.
Voyager used its approximately 1,530,000 interest-bearing Voyager Earn Program Accounts to raise $5 billion worldwide as of March 1, 2020, the cease and desist says. Approximately 52,800 accounts were New Jersey-based holding approximately $197 million in assets, the state regulator said.
The investigations, which include Alabama, Kentucky, New Jersey, Oklahoma, Texas, Vermont and Washington, alleges that the firm's Voyager Earn Program Accounts are not registered as securities with any other securities regulator, despite the fact that they are not exempt from registration.
Up until now, the firm issued every every Voyager customer a Voyager Earn Program Account promising an attractive interest rate that is paid monthly in the same type of cryptocurrency as originally invested, unless they opt out, the New Jersey Bureau of Securities said in its cease and desist order, which was issued yesterday.
“After obtaining transfers of cryptocurrencies from retail investors, Voyager pools these cryptocurrencies together to fund its various income generating activities, including lending operations, proprietary trading, cryptocurrency staking, and investments in other cryptocurrency trading platforms, such as Celsius Network,” the bureau said.
The lack of protection and regulatory oversight subjects the Voyager account investors “to additional risks not borne by investors who maintain assets with most SIPC member broker-dealers, or with banks, savings associations, or credit unions, although Voyager does disclose the lack of insurance of digital assets to investors,” the regulator added.
“Today’s action says loud and clear that the cryptocurrency securities market is not the Wild West, and investor-protection laws absolutely apply,” Acting Attorney General Platkin said in a statement. “Through efforts like this one, we continue to hold accountable all those who threaten the integrity of our financial industry and place investors at risk.”
Voyager Digital did not immediately respond to a request for comment.
The investigations and cease and desist order continue a year-long push by state regulators clamp down on unregistered interest-bearing accounts. BlockFi was the first company targeted by state and federal regulators last July, The firm had raised at least $14.7 billion from what regulators said were the unlawful sale of unregistered securities worldwide. BlockFi agreed to pay a $100 million fine and promised to register its money market-type product as a security.
This is the third action by the New Jersey securities bureau to stop a cryptocurrency firm based in the state from offering and selling unregistered interest-bearing accounts, the agency said.