Bitcoin exchange Gemini is being investigated by the New York Department of Financial Services (NYDFS) for making false claims that the Gemini Earn program is allegedly insured by the Federal Deposit Insurance Corporation (FDIC), according to an Axios report.
Bitcoin exchange under investigation!
Following the collapse of FTX, crypto lending platform Genesis Global Capital, which partnered with Gemini to offer the yielding Gemini Earn program in December 2022, stated that it had invested in FTX and Alameda Research, and subsequently suspended withdrawals for the Earn program. In the meantime, Gemini has reportedly reassured Earn program investors that their investments are safe. However, after Genesis stopped withdrawals, Gemini also suspended withdrawals from Earn accounts.
When the cryptocurrency market exploded last year, Gemini Earn customers repeatedly asked the company if their assets were safe. The Axios report noted that some of Gemini’s responses reviewed by Axios highlighted links with the Federal Deposit Insurance Corporation.
There is a penalty for misrepresentation.
cryptocoin.com Earlier this month, the SEC filed a complaint against Gemini and Genesis for offering unregistered securities through their Earn programs. Last week, law firm Pomerantz filed a class action lawsuit against Gemini for defrauding Earn investors by making false promises and false statements.
“All fiat currencies held by Gemini to redeem your GUSD are held in a secure account by our partner financial institutions and are eligible for FDIC insurance,” Bitcoin exchange Gemini reportedly told an investor asking about the safety of its Gemini Dollar (GUSD) holdings. “Federal law prohibits anyone from implying that an uninsured product is FDIC-insured or knowingly misrepresenting the scope and form of deposit insurance,” Axios reports.
Why is this important?
Customers say they believe their accounts are insured by the government agency. However, they were not. It was a bit of a costly confusion. Approximately 340,000 Earn customers currently have approximately $1 billion worth of frozen assets on the platform. It’s unclear whether they’ll be able to get him back.
GMI’s partner, a crypto lender called Genesis, has now gone bankrupt. And both companies are facing a Securities and Exchange Commission investigation for offering unregistered securities through Earn. Axios says the New York State agency that regulates Gemini is investigating the firm. An agency spokesperson said they could not comment on ongoing investigations.
