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Comment by ww520 | Hacker News Reader

There's a myth that Voyager is FDIC insured. It's pure marketing.

Voyager has an omnibus account with the Metropolitan Commercial Bank where Voyager's customers deposit their money. Voyager acts as the money manager of the omnibus account and has absolute control over the money.

Metropolitan is a member of FDIC and is FDIC insured. In the case of the Metropolitan bank failing, the FDIC insurance kicks in to cover any loss of the omnibus account upto 250K. However, Voyager is NOT a member of FDIC and is not FDIC insured. In the case of Voyager failing, the money is gone. FDIC won't be involved as Metropolitan is still fine.

Voyager customers hoping FDIC coming in to cover their loss are going to have a rude awakening.

Edit: A simple analogy is that your parents and you open a shared account with a bank. Your parents lose all the money from the account. FDIC is not going to cover any of the loss since the bank is fine.

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Hm.. interesting. In their medium article linked below they say the funds are safe even in case of the failure of the company not just their bank partner, but on their website in the same text the "company failure" is not there. (and even just saying "company" in the article is a little vague because they don't say which company):

"Through our strategic relationships with our banking partners, all customers’ USD held with Voyager is now FDIC insured. That means that in the rare event your USD funds are compromised due to the _company_ or our banking partner’s failure, you are guaranteed a full reimbursement (up to $250,000)."

https://invest-voyager.medium.com/usd-held-with-voyager-is-n...

https://www.investvoyager.com/blog/voyager-is-now-fdic-insur...

They were misrepresenting their FDIC status if they were claiming FDIC covering their company's failure. They might be cleaning their language to avoid legal problems.

This article (https://amycastor.com/2022/07/02/who-had-voyager-digital-nex...) says they'd convert any USD you sent them to USDC which are not insured.

Just two weeks ago they had the following in a blog post:

> This is also a good time to remind everyone that USD is held by our banking partner, Metropolitan Commercial Bank, which is FDIC insured. The cash you hold with Voyager is protected up to $250,000–which means it’s as safe with us as at a bank.

They also said:

> Through our strategic relationships with our banking partners, all customers’ USD held with Voyager is now FDIC insured. That means that in the rare event your USD funds are compromised due to the company or our banking partner’s failure, you are guaranteed a full reimbursement (up to $250,000).

The "That means that in the rare event your USD funds are compromised due to the company" is what is confusing people.

They are misrepresenting their FDIC status if they claim FDIC covers their company's failure.

That's misleading marketing, and might even be a federal crime.

Their terms of service say clearly:

>FDIC insurance does not protect against the failure of Voyager

https://www.investvoyager.com/useragreement/

What the hell? Is there no penalty for advertising as being FDIC insured when client deposits are not? Plain as day I checked their tweets and they made a statement about FDIC insurance and the next sentence was telling you to start your crypto investment.

IMO any non-FDIC entity advertising being FDIC insured is borderlining on fraudulent advertisement.

I mean technically they are FDIC insured…it’s just their “depositors” aren’t.

https://www.consumerfinance.gov/compliance/circulars/circula...

I'd be interested if someone can comment with more information. Here are the details from Voyager's legal docs:

> Customer understands and acknowledges that Customer may arrange to deposit United States Dollars (“USD” or “Cash”) into the Account. Cash deposited into the Customer’s Account is maintained in an omnibus account at Metropolitan Commercial Bank (the “Bank”), which is a member of the Federal Deposit Insurance Corporation (“FDIC”). Voyager maintains an agreement with the Bank whereby the Bank provides all services associated with the movement of and holding of USD in connection with the provision of each Account. Therefore, each Customer is a customer of the Bank. All U.S. regulatory obligations associated with the movement of, and holding of, USD in connection with each Account are the responsibility of the Bank. For purposes of clarity, any services pertaining to the movement of, and holding of, USD are not provided by Voyager or its Affiliates. Cash in the Account is insured up to $250,000 per depositor by the FDIC in the event the Bank fails if specific insurance deposit requirements are met. FDIC insurance does not protect against the failure of Voyager or any Custodian (as defined below) or malfeasance by any Voyager or Custodian employee.

My reading of that, then, is that if you have USD cash in that account, then Voyager can NOT restrict your withdrawal of that cash, due to this line "All U.S. regulatory obligations associated with the movement of, and holding of, USD in connection with each Account are the responsibility of the Bank." They are clearly saying here that, basically "For purposes of your cash, you are an individual customer of the Bank (which is FDIC insured), and the Bank is responsible for following Banking regulations". AFAIK banks are not allowed to just restrict withdrawals as Voyager has done.

So it seems like your crypto could all be tits up, but your cash should be FDIC insured.

Your cash is FDIC insured in regarding to Metropolitan failure. Your cash is not FDIC insured in regarding to Voyager failure.

Omnibus account is a shared account which Voyager has absolute control. See their language below where Metropolitan grants them the right on "movement of and holding of USD," i.e. they can move the money as they see fit.

"Voyager maintains an agreement with the Bank whereby the Bank provides all services associated with the movement of and holding of USD in connection with the provision of each Account."

As for Voyager customers withdrawing the money from Metropolitan, they can try. Curious to see how far they get.

IANAL, but I think what they are trying to say here is "We are not a bank. Dear SEC, please don't treat us like one - go ask Metropolitan for all your regulatory cravings".

"Therefore, each Customer is a customer of the Bank", ehm, does the bank know about it? Each bank account must have a legal owner (or multiple ones for a joint account) and I somehow doubt Voyager would put their entire customer base as the joint owners of their bank account.

The "Cash in the Account is insured up to $250,000 per depositor" part is deliberately misleading. As far as the bank is concerned, there is only one depositor - Voyager.

In general, you need to look at specific scenarios:

1. Voyager goes belly up and you still had $1000 on your account. You could:

1.1. Sue Voyager. The court will likely rule you as a creditor granting you a claim against some fraction of their residual assets. You will get anywhere between $0 and $1000 depending on other creditors, their claims and the amount of remaining assets. Quite likely, not much.

1.2. Sue the bank. The bank will show that the omnibus account still holds some USD (that might be less than the end users' deposits) and will tell you to go sue Voyager as a creditor.

1.3. File a claim with FDIC. They will tell you to bite dust because they cover the business between the bank and Voyager. You are neither of those and have no business with them.

2. The bank goes belly up. Voyager will file a claim with FDIC and get $250K for ALL users. This will make them default on the users' claims, hence go to 1.1.

Maybe that myth got started when they wrote a blog post to that effect:

https://invest-voyager.medium.com/usd-held-with-voyager-is-n...

I am pretty certain people there will end up in prison for making these kind of false claims.

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