OKCoin’s fake insurance claims draw the ire of FDIC

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The U.S. Federal Deposit Insurance Corporation (FDIC) has warned the OKCoin exchange over fake insurance claims on its advertising materials and social media.

In a letter to OKCoin CEO Hong Fang, FDIC’s assistant general counsel Seth Rosebrock accused the exchange of violating the Federal Deposit Insurance Act with the claims.

Today, we issued letters to three companies, demanding they cease and desist from making false and misleading statements in English and Spanish regarding FDIC deposit insurance status. We ask that they take immediate corrective action.https://t.co/4fsINu8Fd1 pic.twitter.com/K5YtH8KXXu

— FDIC (@FDICgov) June 15, 2023

The FDIC identified three instances in which the digital asset exchange or its executives made misleading claims about customer protection. This includes a blog post detailing 10 reasons to use the exchange where it claims to be “licensed across the US with FDIC insurance on OKCoin accounts.” The post has since been taken down.

In another blog post, the exchange makes similar claims about HASH, a digital asset listed on its platform. “Provenance Blockchain and its utility token HASH has received broad regulatory acceptance from the SEC, OCC, FED, and the FDIC,” said the blog, which has also been taken down.

In a third incident, the chief marketing officer for OKCoin claimed on Twitter that “if you are in the US, we offer FDIC insurance on USD deposits.”

All these statements contain false and misleading statements about FDIC deposit insurance, the agency said.

“In fact, OKCoin is not FDIC-insured and the FDIC does not insure non-deposit products. By not distinguishing between US-dollar deposits and crypto assets, the statements imply FDIC insurance coverage applies to all customer funds (including crypto assets),” it said.

The FDIC wants OKCoin to take down all statements suggesting implicitly and explicitly that the exchange or its products fall under FDIC insurance. It also wants the exchange to cease and desist from making any such claims in the future. OKCoin must write to the agency within 15 days to confirm its compliance with all the requirements.

An OKCoin spokesperson acknowledged receipt of the letter and said the exchange is working to resolve the matter:

“A core principle at OKCoin is to respect applicable laws and regulations, and we remain committed to collaborating with stakeholders including regulators whenever possible. OKCoin is aware of this matter and is taking immediate action to assess the statements flagged by the FDIC and address them as necessary.”

FDIC has previously issued similar warnings to digital asset firms that were falsely passing off as FDIC-insured. This includes bankrupt lender Voyager Digital and FTX US, the American subsidiary of the collapsed exchange.

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