Three companies and certain associated parties received
cease-and-desist letters from the Federal Deposit Insurance Corp. (FDIC) for
making false and misleading statements about federal deposit insurance. The
letters highlight specific examples of violations of the FDIC Act.
Based on evidence collected by the FDIC, the agency ordered PrizePool,
Inc., AmeriStar, LLC, and HighLine Gold, LLC, to immediately stop:
1.
Suggesting their financial products are insured
by the FDIC;
2.
Using the agency’s name or logo;
3.
Misrepresenting the nature or extent of deposit
insurance; and
4.
Failing to clearly identify their relationships
with insured depository institutions for customer deposits and the funds in
which they may be deposited.
The agency said it found evidence suggesting
misrepresentations about deposit insurance are causing consumer harm or have
the potential to cause such harm.
“The Federal Deposit Insurance Act prohibits any person from
engaging in false advertising by misusing the name or logo of the FDIC or from
making knowing misrepresentations about the existence of or the extent or
manner of deposit insurance,” FDIC Chairman Martin Gruenberg said in a press
release. “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.”
The FDIC issued a joint letter to AmeriStar and HighLine
Gold, noting it had reason to believe they are related entities because they
share many of the same principals and the same physical address. The letter
cites certain statements appearing on AmeriStar’s website and social media accounts,
which contain “apparent misrepresentations about FDIC deposit insurance.” These
statements include the following:
·
AmeriStar’s website claims customers’
“investments” in AmeriStar’s “High Yield Certificate of Deposit Program” (“CD Investment Program”) are “FDIC Insured.”
·
Its website states there is “no maximum amount,”
on customer investments and that all investments “are fully insured by FDIC
insurance at all times...”
·
Several putative customer “reviews” stating that
AmeriStar’s product is “FDIC-insured.”
·
Its Instagram and YouTube accounts contain
videos in which individuals state that AmeriStar’s CD Investment Program “is
backed by FDIC insurance.”
·
The company’s website claims customer
investments “qualify for up to a maximum
of $2,500,000 in FDIC insurance when placed at program banks in the deposit ...
program,” but website fails to clearly identify the insured depository institutions
(IDIs) with which AmeriStar has an existing relationship for the placement of deposits.
·
AmeriStar provides a hyperlink at the bottom of
its homepage to an IDI’s sweep program and a list of its alleged program banks,
despite having no relationship with the IDI.
The FDIC’s letter to PrizePool also pointed to several website
and social media messages improperly implying or misrepresenting that its
products were FDIC insured, including:
·
A statement on PrizePool’s website saying its
customers’ deposits are “FDIC-insured up to $500k.”
·
Customer “testimonials” on the company’s website
stating that PrizePool is a “member of the FDIC,” and that PrizePool itself is
“FDIC-insured.”
·
A post on the company’s Instagram account,
stating that PrizePool’s “Accounts are FDIC-insured up to $500K.”
·
PrizePool’s Instagram and TikTok accounts
feature similar testimonials, in which putative customers encourage users to
invest in PrizePool on the ground that it is a completely risk-free investment
owing to its FDIC-insured status.
Any person representing or implying that an uninsured
financial product is FDIC–insured or knowingly misrepresenting the extent and
manner of deposit insurance is prohibited under the FDI Act. Companies are
further prohibited from implying that they are FDIC-insured or that their
products are FDIC–insured by using “FDIC” in their names, advertisements or other
documents.
The FDIC adopted a final rule in December to amend part
328 of the FDIC Act – pertaining to the agency’s regulations over false
advertising, misrepresentations of deposit insurance coverage and misuse of the
FDIC’s name and logo.