New Jersey Orders Voyager to ‘Cease and Desist’

A cease and desist order has been issued by the New Jersey Bureau of Securities against Voyager Digital for using its Voyager Earn program to sell unregistered securities. Voyager Digital (VGX) is recognized as a centralized trading, staking and lending platform based on crypto. According to the order, every crypto lending and staking program that has been issued since 2019 via the program is an unregistered security because it is promising interest rates as high as 12%. As far as evidence is concerned, the Bureau has cited the claims on the Voyager’s website as evidence for this allegation.

The said messages encourage users to grow their portfolio and to reach a new frontier of investing. As per New Jersey, there are a total of 52,800 accounts in the state, which have assets of approximately $187 million and these are all on Voyager. The platform has a total number of 1.5 million active accounts and the total number of assets are valued at $5 billion. The marketing tactics of the company also received a lot of criticism, as the regulators said that promotions for the Voyager Earn program did not disclose that the platform’s parent company i.e. Voyager Digital LLC is not based in the United States. Instead, the publicly-traded company is based in Canada.

According to the order, this misinformation creates a misleading impression in regard to the regulatory status of Voyager Digital LLC. The Bureau went on to say that even though Voyager claims to be licensed, the fact is that the platform has a license to operate as a ‘money service business’ in a couple of states. As per the Bureau, this means that it is not permitted to sale unregistered securities. It said that this claim could create a misleading impression that the platform has a license to sell these securities, when it does not.

Voyager has had to face similar orders in about five other states of the US, which include Texas, Oklahoma, Alabama, Vermont and Kentucky. It has been told to explain the reason for selling unregistered securities if it wants to continue its operations in the aforementioned states. This incident is part of a growing list of similar orders and cases that have been made against crypto companies, which are offering users interest-bearing accounts. BlockFi, a crypto lending platform had faced a similar case back in February and the Washington state had issued a cease and desist order.

In addition, a penalty of $100 million had been imposed for selling unregistered securities because of its interest-bearing accounts. The Securities and Exchange Commission (SEC) had threatened last September to file a case against crypto exchange Coinbaseif it launched the Coinbase Lend program. The long-awaited program would have been similar to the interest-bearing accounts that Voyager and BlockFioffer. Brian Armstrong, the chief executive of Coinbase, had called the actions of the SEC ‘really sketchy’ at that time because the threat had come without any legal overtures of any kind. The Coinbase program had been aimed at crypto lenders.