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NY Department of Financial Services Started Investigating Crypto Exchange Gemini

NY Department of Financial Services Started Investigating Crypto Exchange Gemini

Gemini is under the investigation of yet another United States regulator.

New York State’s Department of Financial Services (NYDFS), an institution responsible for regulating financial services and products in New York, has reportedly launched an investigation into crypto exchange Gemini.

According to the Axios report shared on January 30th, the investigation was launched in response to Gemini investor reports that assets in their Earn accounts were protected by the Federal Deposit Insurance Corporation (FDIC).

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The Federal Deposit Insurance Corporation is an independent agency supplying deposit insurance to depositors in American depository institutions.

Axios revealed several customer letters, which asked Gemini about the safety of their GUSD. In response to one of those emails, Gemini reportedly noted:

GUSD reserves are held by Gemini in accounts at U.S. FDIC-insured bank accounts and money market funds holding short-term treasury bonds. The cash portion of these GUSD reserves may be eligible for FDIC 'pass-through' insurance for Gemini customers, in the event of the failure of a bank holding the U.S. dollar deposit portion of the GUSD reserves.

In its report, Axios highlighted that it is unclear whether Gemini actually violated federal laws. Some customers may have been confused with the wording of Gemini’s response and considered that the company was talking about Earn products. 

If the investigators discover that Gemini was referring to assets held at financial institutions, the company won’t face any consequences, as they are subject to FDIC insurance. 

It is worth noting that the Federal Deposit Insurance Act prohibits individuals from “implying that an uninsured product is FDIC–insured or from knowingly misrepresenting the extent and manner of deposit insurance."

Following similar allegations, NYDFS issued cease and desist orders to five crypto-related firms, FTX US, Cryptonews, SmartAssets, Cryptosec, and FDICCrypto.

Recently, the United States Securities and Exchange Commission (SEC) filed a complaint against Genesis Global Capital and Gemini Trust for selling unregistered securities to retail investors under the Earn lending program.

Gile K., Market Sentiment Analyst
Gile is a Market Sentiment Analyst who understands what public events may form what emotions. Her experience researching Web3 news and public market messages – including cryptocurrency news reports, PRs, and social network streams – is critical to her role in helping lead the Crypto News Editorial Team.
As an intelligent professional in public relations, together with the team, she aims to determine real VS fake news patterns, and bring her findings to anyone searching for unbiased news and events happening in the FinTech markets. Her expertise is uncovering the latest trustworthy & informative Web3 announcements to the masses.
When she's not researching the trustworthiness of mainstream stories, she spends time enjoying her terrace view and taking meticulous care of her outdoor environment.

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