U.S. digital asset exchange Gemini repeatedly lied to its Earn account customers about being insured by the Federal Deposit Insurance Corporation (FDIC), a new report claims.
The exchange reportedly kept referring to the FDIC in its communications with clients who were worried about the safety of their funds, Axios reports. This assurance led many clients who held its interest-bearing accounts to conclude that their funds were safe and would be refunded in the case of a Gemini collapse.
Gemini halted withdrawals for 340,000 clients after the collapse of Genesis, its business partner, which filed for bankruptcy last month.
The FDIC has warned digital asset companies against making false claims regarding their insurance status. Last August, it issued cease and desist letters to five VASPs, demanding they stopped making “false and misleading statements about FDIC deposit insurance.” These companies included FTX.US, the American subsidiary of Sam Bankman-Fried’s collapsed digital asset exchange FTX.
While its peers were receiving warnings, Gemini kept on referencing the FDIC in communications with its customers, Axios reports, citing several emails from the company to frantic customers.
Gemini was, however, vague about the FDIC links. The outlet reports that most of its emails seemed to reference its deposits at outside banks rather than users’ deposits in its Earn product. In addition, it kept referring to Gemini USD (GUSD), its own stablecoin.
In one sample email to one of...
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