Five entities were recently ordered by the Federal Deposit
Insurance Corp. (FDIC) to stop making false and misleading statements about
FDIC deposit insurance. The cease-and-desist orders were issued within a month
of the agency’s recent final rule to strengthen protection over its branding.
The FDIC is ordering Atmos Financial, PBC (Atmos);
BybitcoinEx, Inc. (BybitcoinEx); ORGANO Payments, Inc. and its subsidiary OGPay
(OGPay); Horizon Globex GmbH (Horizon), which operates Upstream Exchange; and
Zil Money Corp. (Zil) to take immediate corrective action to address allegedly
false or misleading statements.
The companies and certain associated parties are accused of violating
the Federal Deposit Insurance Act (FDI Act) and its implementing regulations by:
1)
falsely stating or suggesting they or certain
uninsured financial products are FDIC-insured;
2)
misusing the FDIC name or logo;
3)
misrepresenting the nature or extent of deposit
insurance; and/or
4)
failing to clearly identify the insured
depository institutions with which they have a relationship for the placement
of customer deposits and into which funds may be deposited.
The FDIC characterizes these as false and misleading “material
misrepresentations and omissions” with the potential to harm consumers.
“Combatting misrepresentations about deposit insurance
coverage goes to the heart of the FDIC’s mission of maintaining stability and
public confidence in the nation’s banking system,” FDIC Chairman Martin
Gruenberg said in a press release. “These practices can not only confuse and
harm those who are targeted with the false promise of deposit insurance, but,
if left unchecked, could also undermine confidence in the FDIC, FDIC–insured
banks, and the U.S. banking system.”
The FDI Act further prohibits companies from using “FDIC” in
the company’s name, advertisements or other documents to imply they are
FDIC-insured or their products are FDIC–insured. The FDIC is authorized by the
FDI Act to enforce this prohibition against any person.
The FDIC adopted
a final rule to amend part 328 of its FDI Act regulations in late
December. Specifically, the rule updates the FDIC’s regulations regarding false
advertising, misrepresentations of deposit insurance coverage and misuse of the
FDIC’s name and logo. For example, the final rule clarifies that
FDIC–associated terms or images may not be used in marketing and advertising
materials to suggest that uninsured financial products or non–bank entities are
insured or guaranteed by the FDIC in the unlikely event of a failure.
To determine if an institution is FDIC–insured, the agency
advises consumers to ask a representative of the company, look for the FDIC
sign at the institution or use the FDIC’s BankFind tool. The FDIC
also has published an FAQ with general information about FDIC deposit insurance,
as well as a fact sheet about digital asset companies.