Gemini’s Crypto Exchange Is Being Investigated By New York Regulator For FDIC Claims

Key Points:

• New York Department of Financial Services (NYDFS) is looking into the statements made by the cryptocurrency exchange Gemini regarding the security of its users’ money.
• Gemini stopped accepting withdrawals from its Earn product due to the effects of the demise of another exchange, FTX.

According to Monday Axios story, the New York Department of Financial Services (NYDFS) is looking into the statements made by the cryptocurrency exchange Gemini regarding the security of its users’ money.

According to reports, Gemini regularly asserted last year that the Federal Deposit Insurance Corporation’s backing ensured the safety of the assets of consumers utilizing its Earn program (FDIC). Financial companies are not allowed to indicate that a product is FDIC-insured when it is not.

In November of last year, Gemini stopped accepting withdrawals from its Earn product due to the effects of the demise of another exchange, FTX.

The platform is thought to have about $900 million frozen as a result. The stoppage was attributed by Gemini to a similar freeze at the now-defunct cryptocurrency lender Genesis, a division of the blockchain giant Digital Currency Group. The exchange had invested monies from its Earn users there.

As the cryptocurrency market imploded last year, Gemini Earn customers repeatedly asked the company if their assets were safe. Some of Gemini’s responses, reviewed by Axios, emphasized connections to the Federal Deposit Insurance Corporation.

Why it matters: Customers say that led them to believe their accounts were insured by the government agency. They weren’t.

• It was a costly bit of confusion. Some 340,000 Earn customers now have had almost $1 billion worth of assets frozen on the platform. It’s unclear if they’ll ever get it back.
• GMI’s partner, a crypto lender called Genesis, is now bankrupt. And both companies are facing Securities and Exchange Commission charges for offering unregistered securities through Earn.
• The New York State agency that regulates Gemini is investigating the firm, Axios has learned. An agency spokesperson said they could not comment on ongoing investigations.

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