Many Gemini Earn users reportedly claimed assets in their accounts had been protected by the Federal Deposit Insurance Corporation.
New York State’s Department of Financial Services is reportedly investigating cryptocurrency exchange Gemini over claims the firm made in regards to assets under its Earn lending program.
According to a Jan. 30 report from Axios, the “New York State agency that regulates Gemini” — the Department of Financial Services handles firms falling under the states’ BitLicense regime, including the crypto exchange — was investigating following reports many users believed assets in their Earn accounts had been protected by the Federal Deposit Insurance Corporation, or FDIC. The government agency previously issued cease and desist orders to five crypto firms making similar claims, including FTX US.
It's unclear if Gemini may have violated federal laws due to some customers seemingly taking away that the FDIC protected Earn products rather than assets held at financial institutions that are subject to such insurance. Under the Federal Deposit Insurance Act, individuals are prohibited from "representing or implying that an uninsured product is FDIC–insured or from knowingly misrepresenting the extent and manner of deposit insurance."
Genesis, the crypto lender responsible for operating the Earn program in partnership with Gemini, halted withdrawals in November 2022, citing “unprecedented market turmoil.” The firm subsequently filed for Chapter 11 bankruptcy in January. Reports at the time suggested up to $900 million in Earn user funds could have been locked.
Since the fallout with the Earn program, Gemini has been the target of regulators and crypto users alike. In January, the U.S. Securities and Exchange Commission charged the exchange with offering unregistered securities through Earn, while a group of investors filed a lawsuit against Gemini founders Tyler and Cameron Winklevoss in December, alleging fraud.
Cameron Winklevoss has claimed on social media that Digital Currency Group CEO Barry Silbert — DCG is the parent company of Genesis — as well as Genesis were responsible for defrauding more than 340,000 users in Gemini’s Earn program. According to the Gemini co-founder, Silbert, DCG, and Genesis orchestrated "a carefully crafted campaign of lies" aimed at covering up the lending firm’s lack of capitalization.
All writers’ opinions are their own and do not constitute financial advice in any way whatsoever. Nothing published by CoinDesk constitutes an investment recommendation, nor should any data or Content published by CoinDesk be relied upon for any investment activities. CoinDesk strongly recommends that you perform your own independent research and/or speak with a qualified investment professional before making any financial decisions.
Recommended Content
Editors’ Picks
Is Altcoin Season here as Bitcoin reaches a new all-time high?
Bitcoin reaches a new all-time high of $98,384 on Thursday, with altcoins following the suit. Reports highlight that the recent surge in altcoins was fueled by the victory of crypto-friendly candidate Donal Trump in the US presidential election.
Shanghai court confirms legal recognition of crypto ownership
A Shanghai court has confirmed that owning digital assets, including Bitcoin, is legal under Chinese law. Judge Sun Jie of the Shanghai Songjiang People’s Court shared this opinion through the WeChat account of the Shanghai High People’s Court.
BTC hits an all-time high above $97,850, inches away from the $100K mark
Bitcoin hit a new all-time high of $97,852 on Thursday, and the technical outlook suggests a possible continuation of the rally to $100,000. BTC futures have surged past the $100,000 price mark on Deribit, and Lookonchain data shows whales are accumulating.
Shiba Inu holders withdraw 1.67 trillion SHIB tokens from exchange
Shiba Inu trades slightly higher, around $0.000024, on Thursday after declining more than 5% the previous week. SHIB’s on-chain metrics project a bullish outlook as holders accumulate recent dips, and dormant wallets are on the move, all pointing to a recovery in the cards.
Bitcoin: New high of $100K or correction to $78K?
Bitcoin surged to a new all-time high of $93,265 in the first half of the week, followed by a slight decline in the latter half. Reports highlight that Bitcoin’s current level is still not overvalued and could target levels above $100,000 in the coming weeks.
Best Forex Brokers with Low Spreads
VERIFIED Low spreads are crucial for reducing trading costs. Explore top Forex brokers offering competitive spreads and high leverage. Compare options for EUR/USD, GBP/USD, USD/JPY, and Gold.