Crypto Exchange Gemini Faces Scrutiny! New York Regulator Launches Investigation On FDIC Claims
In a recent report from Axios, Gemini has undergone the New York regulators' scrutiny for making false FDIC claims.
Last year, the crypto firm assured investors of their funds' safety despite halting operations, which now seems to be just an illusion.
The cryptocurrency market has seen a spike in popularity in recent years, with many investors jumping to this digital asset class with the hope of securing their financial future. However, the crypto space has also seen a growing number of bankruptcies, raising concerns about the stability and security of these investments.
Recently, crypto lender Genesis Global Capital has rocked the financial world with its stunning chapter 11 bankruptcy filing, leaving its largest creditor, crypto exchange Gemini, facing severe heat from the New York regulator on FDIC allegations, according to a report.
Gemini Prepares For A Legal Battle
Last year, the crypto world was sent into a frenzy when Gemini and its lending partner Genesis halted their operations. The popular Gemini Earn program, which offered a lucrative 7.4% interest rate on crypto deposits, was forced to suspend operations, leaving over 340K investors in the lurch and putting a staggering $900 million at risk. Moreover, Gemini stopped accepting withdrawals in November after being affected by the impact of FTX’s demise.
Amidst the chaos, Gemini made bold statements as it claimed that users’ assets were safe as they were backed by the Federal Deposit Insurance Corp (FDIC). However, this claim ignited controversies as it is illegal for a firm to falsely state an uninsured product as FDIC-insured. In addition, the Federal law stops anyone from claiming an uninsured product as FDIC–insured.
Gemini Put Customers In An Illusion
The statement from Gemini assured investors and users of the safety of their assets through a government agency, but the funds are still at risk. As a result, nearly $900 million is stuck on the platform, and users are unsure whether they will ever get their funds back.
To thrash the burden and bring back its reputation, Gemini accused its lending partner, i.e., the now-bankrupt firm Genesis, of halting transactions as Gemini deployed all its customers’ funds into it.
Both Genesis and Gemini now face strict actions from the SEC as the authority has accused Genesis Global Capital LLC and Gemini Trust Company LLC of offering unregistered services and selling securities through the Earn program.
The SEC commented, “Gemini Earn investors tendered their crypto assets to Genesis, with Gemini acting as the agent to facilitate the transaction. Genesis then exercised its discretion in how to use investors’ crypto assets to generate revenue and pay interest to Gemini Earn investors.”