The New York Department of Financial Services (NYDFS) recently launched an investigation into Gemini, a cryptocurrency exchange owned by Winklevoss, for allegedly misleading Earn users that their assets were FDIC-insured. Earn was a program that provided clients up to 7.4% APY on their holdings, but it went down after Gemini’s partner Genesis halted withdrawals and filed for bankruptcy. Gemini had previously revealed that deposits at outside banks were protected, but Earn users said they could not find the difference, leading to confusion. Gemini and Genesis had launched the Earn program in 2021, and it had amassed nearly 350,000 users in the following years. Gemini vowed to use “every tool available” to refund Earn investors and set up a creditors’ committee to help with the task.
The US Securities and Exchange Commission (SEC) also filed a complaint against Gemini and Genesis for allegedly selling unregistered securities to retail investors in the US. Chairman Gary Gensler said the charge was intended to show that cryptocurrency lending platforms and intermediaries must abide by American laws. Gemini has also had to make staff reductions due to the market downturn and “unprecedented fraud” within the industry. 10% of staff were laid off in July 2021 and another 10% in July 2022.