The Commodity Futures Trading Commission (CFTC) has filed a complaint in the US District Court for the Southern District of New York against Stephen Ehrlich, the former CEO of now-bankrupt entities Voyager Digital, Voyager Digital Holdings, and Voyager Digital (collectively, Voyager).
The complaint charges Ehrlich with fraud and registration failures in connection with the Voyager digital asset platform and Voyager’s operation of an unregistered commodity pool. The CFTC alleges Ehrlich and Voyager falsely touted the Voyager platform as a “safe haven” to earn high-yield returns to induce customers to purchase and store digital asset commodities.
Ian McGinley, director of enforcement, CFTC, said: “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, 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.”
In a statement, Ehrlich said: "The talented management team at Voyager created and maintained our platform in full compliance with the existing regulatory structure. Our team consistently communicated and worked closely with our regulators.”
In its continuing litigation against Ehrlich, the CFTC claims it is seeking restitution, disgorgement, civil monetary penalties, permanent trading and registration bans, and a permanent injunction against further violations of the Commodity Exchange Act (CEA) and CFTC regulations, as charged.
The CFTC's complaint alleges that from at least February 2022 through July 2022, Ehrlich and Voyager engaged in a scheme to defraud customers by misrepresenting the safety and financial health of the Voyager digital asset platform.
The CFTC states that Ehrlich and Voyager, via publicly available postings on social media and their website, touted Voyager as a “safe haven” for customers’ digital assets in an otherwise volatile market environment. Additionally, the CFTC contends Ehrlich and Voyager also promised customers high-yield returns—as much as 12%—on certain digital asset commodities stored on the Voyager platform.
The CFTC alleges that to generate income to pay its customers the promised returns, Ehrlich and Voyager pooled customer assets stored on the Voyager platform and transferred billions of dollars’ worth of customers’ digital asset commodities as “loans” to high-risk third parties. The CFTC asserts that in early 2022, following grossly inadequate due diligence, Ehrlich and Voyager transferred over $650 million in customer digital asset commodities to a digital assets hedge fund on an unsecured basis, with the understanding that the fund would generate returns for Voyager by pooling Voyager’s investment and trading commodity interests. The CFTC states that in so doing, Voyager operated the Voyager Pool and acted as a commodity pool operator (CPO) without the required CFTC registration.
Additionally, the CFTC asserts Ehrlich did not register as an associated person of a CPO, despite soliciting members of the public to contribute to the Voyager Pool.
The CFTC argues that based on the false promises related to the safety of Voyager’s operations and receipt of high-yield returns, customers often collectively stored more than $2 billion worth of digital asset commodities on the Voyager platform.
Voyager was one of several cryptocurrency firms to collapse in 2022, and its digital assets were bought out by FTX for $1.4bn.