The FDIC recently sent a warning letter to a fintech firm that made misleading references to the availability of deposit insurance in promotional materials used for various crypto-related products. Unbanked, Inc, which provided crypto-backed debit card and related services, had previously announced a wind down of operations due to funding issues and increased regulatory scrutiny of the industry. According to an FDIC letter dated August 4, 2023, Unbanked erroneously implied that FDIC insurance was available for cryptocurrency and that FDIC insurance would cover crypto-related losses. The company partnered with FDIC-insured banks to offer accounts that allowed customers to hold the proceeds of crypto trading transactions. However, the FDIC cited statements regarding “FDIC-insured crypto bank accounts” on various social media platforms and marketing materials that failed to disclaim the availability of deposit insurance for crypto assets as evidence that Unbanked had falsely implied that (i) FDIC is available for cryptocurrency and (ii) FDIC insurance protects against cryptocurrency losses. In addition, while acknowledging that customer funds were placed in insured depositary institutions, the FDIC argued that Unbanked’s failure to identify the institutions deprived the consumer of information necessary to understand the “extent or manner of deposit insurance provided.”
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