The New Jersey Securities watchdog has served crypto staking, trading, and lending platform Voyager Digital with a cease and desist order for offering unregistered securities as part of its Voyager Earn Program, under N.J.S.A. 49:3-60.
Effective April 29, 2022, the New Jersey Bureau of Securities has issued a cease and desist order targeting two alleged staking and lending accounts, active since 2019, for offering up to 12% interest. The order was issued based on claims appearing on Voyager’s website homepage encouraging prospective investors to grow their portfolio and embark on a journey to the cutting edge of investing.
The legal document claims, “Digital assets contained in the Voyager Earn Program Accounts are not protected by the Securities Investor Protection Corporation (SIPC), insured by the Federal Deposit Insurance Corporation (FDIC), or insured by the National Credit Union Administration (NCUA) This lack of a protective scheme or regulatory oversight subjects Voyager Earn Program Account investors to additional risks not borne by investors who maintain assets with most SIPC member broker-dealers.”
The Bureau believes that 52,800 out of Voyager’s 1.5 million active accounts and $187 million out of $5 billion in assets originate within the state.
Voyager is not listed in the U.S., warns the report
The securities’ watchdog also states that Voyager is misleading customers by not disclosing that its parent company is listed on the Toronto Stock Exchange in Canada, not on any U.S. exchange, thereby creating a “false impression” regarding Voyager Digital LLC’s “regulatory status.” Additionally, the Bureau questions Voyager’s claims of being licensed in some states since its money services business license does not apply to securities and could mislead naïve investors into thinking that Voyager is licensed to sell securities by virtue of its holding the title of “licensed.”
Not the first time interest-bearing products have ruffled regulators
Alabama, Oklahoma, Texas, Kentucky, and Vermont have all issued orders to Voyager in the past or asked the company to show how it is not selling unregistered securities if it wants to stay in the different states.
Pursuant to this latest cease-and-desist order, Voyager is ordered to stop selling any security, including Voyager Earn Program Accounts “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.” Also, Voyager cannot accept new assets into current Voyager Earn Program Accounts and must not violate “any other provisions of the Securities Law and any rules promulgated thereunder for the sale of any security in New Jersey.”
In February, BlockFi was slapped with a hefty multi-million dollar fine and a cease-and-desist order from Washington state for offering interest on some products, while the Securities and Exchange Commission would have sued Coinbase in September 2021 if it launched its Coinbase Lend Program, which provided interest to lenders. Brian Armstrong, Coinbase CEO, said that the SEC’s threat of legal action was missing a solid legal underpinning.
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