New York’s watchdog accused Gemini of deceiving Earn consumers.
Gemini allegedly deceived its 340,000 Earn users that were FDIC-protected, according to the New York Department of Financial Services.
Genesis, the platform’s partner, stopped withdrawals and filed for bankruptcy, ending the program’s 7.4% APY.
According to Axios, New York’s regulator began investigating the Winklevoss-led trading platform for misrepresenting Earn clients’ assets as FDIC-backed. Federal law prohibits “implying that an uninsured product is FDIC–insured or willfully misrepresenting the scope and mode of deposit insurance.”
Gemini disclosed that outside bank savings are safeguarded, not its own goods. Earn customers couldn’t tell the difference, causing perplexity. Former FDIC senior counsel Todd Phillips acknowledged that crypto platform-user communication might generate confusion:
“Is it skeezy? For sure. Is it illegal? I don’t know. I can’t really say.”
In 2021, Gemini and Genesis launched the Earn program, which quickly grew to approximately 350,000 users. However, the FTX catastrophe disrupted Genesis’ operations and the mutual offering. Investors in Gemini Earn had their funds locked, but the exchange promised to employ “every instrument available” to repay them. It formed a creditors’ committee to assist with the effort and stated that Genesis owes users around $900 million.
Since filing for Chapter 11 bankruptcy protection earlier this month, it is unclear how the latter will repay its obligations.
The US Securities and Exchange Commission has filed a lawsuit against Gemini and Genesis for allegedly marketing unregistered securities to individual investors in the United States. The charge’s purpose, according to Chairman Gary Gensler, is to demonstrate that bitcoin lending platforms and intermediaries must follow American laws.
The recent discontinuation of the Earn program, according to Gurbir S. Grewal, Director of the SEC’s Division of Enforcement, illustrates the need for such investigations. He also recommended that impacted individuals contact the Securities and Exchange Commission’s whistleblower Program.
Gemini has also joined the lengthy list of cryptocurrency firms that have let off employees for a variety of reasons, the most common of which is a market collapse. It recently cut off 10% of its overall personnel, citing poor macroeconomic considerations and “unprecedented fraud” in the business as reasons.
In July 2022, the company cut another 10% of its workforce.
