CFTC files complaint against former CEO of bankrupt digital asset firm

The Commodity Futures Trading Commission filed a complaint against the former CEO of a bankrupt company for fraud and registration failures.

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The complaint, filed in the U.S. District Court for the Southern District of New York, is against Tennessee resident Stephen Ehrlich, the former CEO of now-bankrupt entities Voyager Digital Ltd., Voyager Digital Holdings, Inc., and Voyager Digital, LLC.

The complaint charges Ehrlich with fraud and registration failures in connection with the Voyager digital asset platform and Voyager’s operation of an unregistered commodity pool. Ehrlich and Voyager falsely touted the Voyager platform as a “safe haven” to earn high yield returns to induce customers to purchase and store digital asset commodities.

“This is yet another CFTC action seeking to hold accountable a chief executive officer for his role in the fraudulent operation of a digital asset platform,” CFTC Director of Enforcement Ian McGinley said. “Ehrlich and Voyager lied to Voyager customers. While representing they would treat customers’ digital asset commodities safely and responsibly, behind the scenes, they took shockingly reckless risks with their customers’ assets, leading to Voyager’s bankruptcy and huge customer losses. When their business began to collapse, they continued lying to their customers, concealing Voyager’s true financial health. Amplifying their fraud, Ehrlich and Voyager broke their trust with customers while acting in capacities that required CFTC registration, which they failed to obtain.”

From at least February 2022 through July 2022, the complaint alleges that Ehrlich and Voyager engaged in a scheme to defraud customers by misrepresenting the safety and financial health of the Voyager digital asset platform. Ehrlich and Voyager, via publicly available postings on social media and their website, touted Voyager as a “safe haven” for customers’ digital assets and promised customers high-yield returns—as much as 12%—on certain digital asset commodities stored on the platform.

Further, the CFTC charges said that to generate income to pay its customers the promised returns, Ehrlich and Voyager pooled customer assets stored on the Voyager platform and transferred billions of dollars’ worth of customers’ digital asset commodities as “loans” to high-risk third parties. Additionally, Ehrlich did not register as an associated person of a CPO, despite soliciting members of the public to contribute to the Voyager Pool.

The CFTC is seeking restitution, disgorgement, civil monetary penalties, permanent trading and registration bans, and a permanent injunction against further violations of the Commodity Exchange Act (CEA) and CFTC regulations.