Crypto company that raised $5B ordered to stop selling some offerings. It’s not the ‘Wild West,’ NJ says

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A Jersey City-based cryptocurrency company has been ordered by New Jersey to stop selling interest-earning cryptocurrency accounts, which the state said were “unregistered securities.”

The firm has raised at least $5 billion nationwide with the accounts, the attorney general’s office said on Tuesday.

Voyager Digital Ltd., which also goes by Voyager Digital, LLC and Voyager Digital Holdings, Inc., has been funding its income-generating activities — including lending operations and proprietary trading — at least in part through the sales, which violate state securities law , according to a cease and desist order filed by the New Jersey Bureau of Securities.

“Today’s action says loud and clear that the cryptocurrency securities market is not the Wild West, and investor-protection laws absolutely apply,” said Acting Attorney General Matthew Platkin. “Through efforts like this one, we continue to hold accountable all those who threaten the integrity of our financial industry and place investors at risk.”

The action is the state’s third to stop New Jersey-based cryptocurrency firms from offering and selling unregistered securities in the form of interest-bearing accounts.

“Unregistered securities offerings pose significant risk to investors because the issuers do not make the same types of disclosures, including, for example, providing detailed financial statements that typically accompany registered offerings,” the state said.

The state’s first action was in July 2021, when it announced a cease and desist order against BlockFi Lending, LLC, which the state said raised at least $14.7 billion worldwide from the unlawful sale of unregistered securities.

Then in February 2022, it entered into a settlement with BlockFi that required the company stop offering and selling its interest-bearing cryptocurrency accounts until they were registered with state and federal securities regulators. The settlement also required BlockFi to pay regulators $100 million, $943,396.22 of which went to New Jersey.

The state also filed a cease and desist order against Celsius Network LLC In September 2021, in which the state said the company unlawfully raised at least $14 billion nationwide with the sale of unregistered securities.

“The rules are clear: anyone selling securities in New Jersey must comply with the state’s securities laws,” said Sean Neafsey, acting director of the Division of Consumer Affairs. “Our Bureau of Securities will continue to protect investors by monitoring the marketplace to ensure everyone is following the rules, especially when it comes to the ever-evolving cryptocurrency market.”

The Bureau of Securities said it found that Voyager solicits investors to start Voyager Earn Program Accounts by depositing eligible cryptocurrencies. Voyager then pools these cryptocurrencies together to fund its income-generating activities, it said.

“Investors are promised an attractive interest rate that is paid monthly in the same type of cryptocurrency as originally invested,” the state said.

As of March 1, 2022, Voyager had more than 1.5 million Voyager Earn Program Accounts representing approximately $5 billion in assets. About 52,800 were New Jersey-based accounts worth $197 million in assets, the state said.

But the Voyager Earn Program Accounts are not registered with the state or any other securities regulatory authority, nor are they otherwise exempt from registration, the state said.

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Karin Price Mueller may be reached at [email protected]. Follow her on Twitter at @KPMueller.

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