Allegations Against Metropolitan Commercial Bank in Voyager Bankruptcy Case
A recent lawsuit has brought to light serious accusations against Metropolitan Commercial Bank (MCB), claiming that the bank played a role in Voyager Digital’s deceptive practices toward its customers, allegedly for its own financial benefit. The allegations were presented by Michael Wyse, who is the administrator for Voyager’s wind-down plan, as part of a legal filing last month. The lawsuit contends that MCB, which had partnered with Voyager since 2018 until its downfall in 2022, knowingly allowed Voyager to mislead its users into believing that their deposits were backed by Federal Deposit Insurance Corporation (FDIC) insurance. However, the lawsuit asserts that this insurance never actually extended to cryptocurrency holdings in the event of Voyager’s failure.
Misleading Claims About FDIC Insurance
According to the lawsuit, misleading claims regarding FDIC insurance led many customers to mistakenly believe that their funds, including cryptocurrencies, would be safeguarded should Voyager face bankruptcy. While fiat currency deposits on Voyager’s platform would have been covered in the event of MCB failing, the lawsuit emphasizes that customers’ cryptocurrency assets were not afforded the same protection. Wyse alleges that both MCB and Voyager viewed FDIC insurance as a crucial marketing advantage, with Voyager’s CEO, Stephen Ehrlich, recalling that MCB suggested featuring this insurance as a unique selling point in their promotional materials.
MCB’s Knowledge of Regulatory Violations
The extensive 53-count lawsuit, spanning 149 pages, also accuses MCB of being aware that Voyager operated without the necessary money transmitter licenses and even assisted the exchange in dodging regulatory compliance. Wyse claims that MCB’s involvement significantly contributed to the financial harm suffered by Voyager’s customers, including the devaluation of their assets on the platform and the failure to receive the FDIC insurance they were misled to believe would cover their losses. The lawsuit argues that had MCB not facilitated Voyager’s evasion of regulatory requirements, the company might have been compelled to post surety bonds in additional states, which could have protected customers from incurring losses after the bankruptcy filing.
Bank’s Defense Against the Claims
In response to these serious allegations, a spokesperson from MCB asserted that the bank believes Wyse’s claims lack merit and promised a vigorous defense. They maintain that any misleading statements or actions were solely the responsibility of Voyager and its leadership, not MCB. Furthermore, Wyse contends that without MCB’s assistance, Voyager would not have been able to expand its customer base, resulting in fewer losses during the bankruptcy process. The lawsuit notes that at the time of Voyager’s bankruptcy, the company owed U.S. customers approximately $1.7 billion, a significant portion of which has yet to be recovered over two years later.
Seeking Damages for Affected Customers
As the plan administrator representing 31,867 former Voyager customers, Wyse is pursuing punitive damages and other compensations, the amount of which will be determined at trial, along with reasonable legal costs and expert fees. In a related development, MCB announced its exit from the cryptocurrency sector in January 2023, approximately six months following Voyager’s bankruptcy. The bank stated that its involvement with crypto had never constituted a significant part of its business and claimed that its shift away from this sector began in 2017. Earlier this year, MCB also withdrew from the banking-as-a-service market, citing a desire to minimize exposure to evolving regulatory challenges associated with these activities.
