Over half a dozen U.S. state regulators have cracked down on yet another digital currency lender. This time, it’s Voyager Digital which is being accused of violating securities regulations for its interest-bearing accounts, just over a month since BlockFi paid $100 million to the Securities and Exchange Commission (SEC) for similar charges.
Voyager, whose parent company is publicly listed in Canada, is being pursued by regulators from Indiana, Kentucky, Oklahoma, New Jersey, Texas, Alabama, Washington, and Vermont.
Some state regulators, such as New Jersey and Oklahoma, have issued the firm with cease and desist orders under which the company must stop operating in these states.
New Jersey’s order accused Voyager of violating securities regulations through its Voyager Earn program. Each staking and lending account issued under this program since 2019 in New Jersey is an unregistered security due to its promise of interest rates which go as high as 12%.
“Through efforts like this one, we continue to hold accountable all those who threaten the integrity of our financial industry and place investors at risk,” Attorney General Matthew Platkin commented.
The New Jersey Bureau of Securities alleged that Voyager has 52,800 accounts held by residents of the Garden State, worth $187 million in digital asset value. Overall, Voyager has about $5 billion in assets from 1.5 million users.
Among the things that the New Jersey watchdog took aim at was Voyager’s marketing, which it believes was intentionally misrepresentative. For one, the firm failed to disclose that its parent company is regulated in Canada, not the U.S., “creating a misleading impression with respect to Voyager Digital, LLC’s regulatory status.”
Furthermore, the company was evasive about its licensing. While it claimed on its marketing materials and website to be licensed in the U.S., it left out that its license is for a money service business. Such a claim “may convey the misleading impression to unsophisticated investors that Voyager is ‘licensed’ to offer and sell such securities.”
“Effective on April 29, 2022, Voyager shall CEASE AND DESIST from offering for sale any security, including any Voyager Earn Program Account, to or from New Jersey unless the security is registered with the Bureau, is a covered security, or is exempt from registration under the Securities Law,” the Bureau concluded.
Other states such as Texas, Alabama, and Vermont issued a show cause order, giving Voyager a period of time to put up a defense against accusations of a securities violation, failure to which it shall receive the cease and desist order.
Joseph Borg, the Director of the Alabama Securities Commission, told one outlet that the efforts between the eight regulators are coordinated and are in no way random.
“The thrust is to say, ‘OK guys, it’s time to come to the table. There are some minor differences in the order but the principles are the same,” he commented.
According to Borg, Voyager and the other digital currency lenders have failed to heed the message that regulators sent with their crackdown on BlockFi. The lender had also been on the receiving end of a coordinated crackdown by several state regulators before eventually paying $100 million to the SEC and 32 states to settle charges of selling unregistered securities.
On its part, Voyager denied breaching any securities laws. In a press release on March 30, the company acknowledged receiving the orders from various state watchdogs but said it’s reaching out to them “to clarify certain statements in the orders that Voyager believes are inaccurate.”
“Voyager is firmly convinced that its Earn Program and the Voyager Earn Accounts are not securities and intends to demonstrate its position and defend it as necessary and appropriate,” it added.
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