FTX’s money isn’t insured, FDIC says

FTX was slapped with a cease-and-desist order by the Federal Deposit Insurance Corporation for making false and misleading statements. Funds in insured bank accounts are protected by the FDIC.

Direct deposits from employers to FTX US are stored in individually FDIC-insured bank accounts in the users' names, according to a now- deleted statement from the FTX president. The stock is held in SIPC-insured accounts and is insured by the Federal Deposit Insurance Corp. The funds invested by users are not insured by the Federal Deposit Insurance Corporation.

While not flagged in the letter, users have pointed out another potentially misleading statement from Harrison that says "cash associated with brokerage accounts is managed into FDIC-insured accounts" at FTX's partner bank.

We really didn’t mean to mislead anyone, and we didn’t suggest that FTX US itself, or that crypto/non-fiat assets, benefit from FDIC insurance. I hope this provides clarity on our intentions. Happy to work directly with the FDIC on these important topics.

— Brett Harrison (@Brett_FTX) August 19, 2022

1) Clear communication is really important; sorry!



FTX does not have FDIC insurance (and we've never said so on website etc.); banks we work with do. We never meant otherwise, and apologize if anyone misinterpreted it. https://t.co/MHMSMDE8Le

— SBF (@SBF_FTX) August 19, 2022

Harrison said that FTX didn't suggest that FTX US or non-fiat assets were insured by the FDIC. Bankman-Fried stated that FTX does business with banks that do not have insurance from the Federal Deposit Insurance Corporation. Bankman-Fried says that it may explore ways that individual accounts using direct deposit can be used to further protect customers.

The Federal Deposit Insurance Act prohibits companies from misrepresenting that their products are insured by the federal government. FTX has 15 days to provide proof that it has corrected any misrepresentations. FTX was one of the companies that received a cease-and-desist warning.

The FDIC and FTX didn't respond to the request for comment beyond the contents of the letter.

FTX has begun to offer both traditional stock andcryptocurrencies. Bankman-Fried has a stake in the trading platform and is looking into buying it.

FTX and Bankman-Fried's crypto trading firm, Alameda Research, have managed to stay afloat even though several of their competitors have filed for Chapter 11. Bankman-Fried has extended lines of credit to many struggling firms to help them weather the uncertain economy, and he has a few billion more to give. FTX brought in over a billion dollars in revenue in the first quarter of 2022, according to documents obtained by CNBC