Release Number 8805-23

CFTC Charges Former Chief Executive Officer of Digital Asset Platform with Fraud in Massive Commodity Pool Scheme

October 12, 2023

Washington, D.C. — The Commodity Futures Trading Commission today announced it filed a complaint in the U.S. District Court for the Southern District of New York against Tennessee resident Stephen Ehrlich, the former chief executive officer of now-bankrupt entities Voyager Digital Ltd., Voyager Digital Holdings, Inc., and Voyager Digital, LLC (collectively, Voyager). 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.

In its continuing litigation against Ehrlich, the CFTC seeks 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, as charged.

“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,” said Director of Enforcement Ian McGinley. “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.”

Case Background

The complaint alleges, from at least February 2022 through July 2022, 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 in an otherwise volatile market environment and that Voyager would operate with the “same level of rigor and trust” as a traditional financial institution. Ehrlich and Voyager also promised customers high-yield returns—as much as 12%—on certain digital asset commodities stored on the Voyager platform.

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. In early 2022, following grossly inadequate due diligence, Ehrlich and Voyager transferred over $650 million in customer digital asset commodities to Firm A (a digital assets hedge fund) on an unsecured basis, with the understanding that Firm A would generate returns for Voyager by pooling Voyager’s investment and trading commodity interests. In so doing, Voyager operated the Voyager Pool and acted as a commodity pool operator (CPO) without the required CFTC registration.

Additionally, Ehrlich did not register as an associated person of a CPO, despite soliciting members of the public to contribute to the Voyager Pool. Based on the false promises related to the safety of Voyager’s operations and receipt of high-yield returns, customers often collectively stored more than $2 billion worth of digital asset commodities on the Voyager platform. However, instead of providing a “safe haven,” Ehrlich and Voyager transferred customer digital assets to risky counterparties, such as Firm A, to fuel the high-yield returns used to attract and retain customers. In June 2022, Voyager recalled its customer digital assets commodities from Firm A. Firm A defaulted and, as a result, Voyager experienced dire operational liquidity issues. However, Ehrlich continued to falsely assert publicly that customer assets were safe with Voyager. On July 5, 2022, Voyager filed for bankruptcy, owing its customers in the United States more than $1.7 billion.

Related Civil Action

In a parallel action, on October 12, the Federal Trade Commission (FTC) separately charged Ehrlich and Voyager with violating the FTC Act and the Gramm-Leach-Bliley Act.

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The Division of Enforcement staff responsible for this matter are Alan Simpson, Anthony Biagioli, Stephen Turley, Rachel Hayes, Christopher Reed, and Charles Marvine.

The Division of Enforcement’s Digital Assets Task Force also assisted in this matter.

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CFTC’s Commodity Pool Fraud Advisory

The CFTC has issued several customer protection Fraud Advisories and Articles, including the Commodity Pool Fraud Advisory, which warns customers about a type of fraud that involves individuals and firms, often unregistered, offering investments in commodity pools.

The CFTC also strongly urges the public to verify a company’s registration with the CFTC before committing funds. If unregistered, a customer should be wary of providing funds to that company. A company’s registration status can be found using NFA BASIC.

Customers and other individuals can report suspicious activities or information, such as possible violations of commodity trading laws, to the Division of Enforcement via a toll-free hotline 866-FON-CFTC (866-366-2382), file a tip or complaint online, or contact the Whistleblower Office. Whistleblowers may be eligible to receive between 10 and 30 percent of the monetary sanctions collected paid from the CFTC Customer Protection Fund financed through monetary sanctions paid to the CFTC by violators of the CEA.