The New York Department of Financial Services (NYDFS) is investigating crypto exchange Gemini over claims over its claims related to FDIC.
Users of Gemini Earn are due a total of $765.9 million by the insolvent Genesis. Some of these users contend that the crypto firm misled them because they thought their funds were insured by the FDIC.
The crypto exchange allegedly claimed in communications to users that the Gemini Dollar (GUSD) stablecoin was supported by bank cash deposits that qualified for FDIC insurance.
Users complained in the report that Gemini’s marketing and communications did not make it apparent that its own products, like Earn, were not covered by the FDIC.
The study concluded that while some users believed Gemini Earn itself was FDIC-insured, others thought the crypto exchange’s statements regarding FDIC coverage were “quite plainly false.”
While Gemini’s contacts involving FDIC insurance were “skeezy,” Todd Phillips, a former senior counsel at the FDIC, told Axios that he was unsure if they were actually unlawful.
Businesses are not allowed to intentionally misrepresent the scope of FDIC coverage under federal law. The FDIC and other authorities warned banks that misrepresenting the FDIC’s insurance coverage by cryptocurrency companies posed a significant risk to conventional financial institutions.
The Securities and Exchange Commission levied fines against Genesis and Gemini earlier this month for unregistered securities offers made through the Earn program.
