Gemini loses millions of dollars due to problems with deposit accounting

The system credited money to the purchase of cryptocurrencies without waiting for confirmation from the bank

01.03.2023 - 10:00

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What’s new? Gemini, the cryptocurrency exchange of brothers Tyler and Cameron Winklevoss, faced multimillion-dollar losses due to problems with payments and their accounting. The Information reports, citing its own sources familiar with the matter. For example, Gemini’s system could charge money transfers to its platform before the bank approved them. This allowed customers to make purchases by bank transfer and then cancel them while receiving the cryptocurrency in their account.

Material on The Information website

What else is known? According to three sources, the exchange encountered cases of fraud when issuing a cryptocurrency credit card last year. In addition, the exchange has been losing millions of dollars over the years due to unclear withdrawal policies.

The publication’s interlocutors also reported that the exchange’s customer identification system (KYC) worked poorly, which allowed users to register using fake or someone else’s documents.

Gemini situation. Previously, the exchange had an Earn program with returns of up to 7% per annum on cryptocurrency deposits. Withdrawals from Earn were limited after the exchange’s lending partner, crypto broker Genesis, suspended withdrawals and loans on November 16, 2022. Genesis later filed for bankruptcy, and Gemini held another round of layoffs.

On January 12, the US Securities and Exchange Commission (SEC) charged Genesis and Gemini with unregistered offerings and sales of securities to retail investors through Earn. Gemini co-founder Tyler Winklevoss called the SEC’s actions counterproductive to the company’s attempts to recover funds for program investors.

Axios later reported that Gemini was under investigation by the New York State Financial Services Authority (NYDFS) for allegations that its Earn program was allegedly backed by the Federal Deposit Insurance Corporation (FDIC).

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