The New York Department of Financial Services has reportedly launched an investigation into Gemini, alleging that the cryptocurrency exchange misled its 340,000 Earn users by telling them that their assets were FDIC-protected.
The program, which provided clients up to 7.4% APY on their holdings, went down after the platform’s partner – Genesis – halted withdrawals and filed for bankruptcy.
As reported by Axios, the regulator is investigating the Winklevoss-led trading venue for potentially misrepresenting the extent and manner of deposit insurance.
Federal law forbids anyone from “implying that an uninsured product is FDIC–insured or from knowingly misrepresenting the extent and manner of deposit insurance.”
Gemini previously revealed that the firm’s deposits at outside banks are protected and not its own products. However, Earn clients have said they could not find the difference, hence the confusion.
Todd Phillips – a former senior attorney at the FDIC – agreed that the communication between the crypto platform and its users could indeed cause some sort of misunderstanding: “Is it skeezy? For sure. Is it illegal? I don’t know. I can’t really say.” Gemini and Genesis introduced the Earn program in 2021, which amassed nearly 350