On July 20, the FTC announced a penalty exceeding $16 million will be paid to resolve its claims against three former officers of a now-bankrupt cryptocurrency lending and custody platform, adding two further settlements to the one against the platform’s former CEO already entered in April (previously covered by InfoBytes here). The SDNY, in which the claims were originally brought, entered the two additional stipulated orders against a second and third former officer on June 23 and July 17, respectively. As with the former CEO, the underlying complaint alleged that the defendants engaged in deceptive and unfair acts and practices in violation of Section 5 of the FTC Act, in the marketing and sale of cryptocurrency lending and custody services, and with obtaining customers’ financial institution information through false, fictitious or fraudulent statements, in violation of the GLBA. The July 17 order against the third former officer separately barred misrepresenting the existence or amount of any collateral, security, liquidity, or insurance policy tied to the platform’s products, along with their benefits, rewards, or other material terms.

Both the June 23 and July 17 orders impose a suspended monetary judgment of $4.72 billion against the individual defendant, stipulated to represent the consumer injury alleged in the complaint, and joint and several with the other defendants to the extent subsequently ordered by the court, with the suspension conditioned on the truthfulness of that defendant’s financial disclosures to the FTC. The second former officer was ordered to pay the FTC $4.1 million and the third was ordered to pay $2.014 million. This is in addition to the $10 million the former CEO was ordered to pay in April. Both new orders further imposed permanent injunctions barring the defendants from misrepresenting products or services, obtaining customers’ financial institution information through false or fraudulent statements, and improperly disclosing consumers’ nonpublic personal information, and they impose multiyear recordkeeping, compliance reporting and monitoring obligations enforceable by the FTC. As with the order against the former CEO previously covered, both new orders also provide that the complaint’s allegations will be treated as established for purposes of any subsequent civil litigation by the FTC, including in a proceeding to enforce its rights to any payment or monetary judgment pursuant to the order, such as a nondischargeability complaint in any bankruptcy case.