On February 28, 2024, the New York State Department of Financial Services (NYDFS) penalized Gemini Trust Company, LLC to return USD 1.1 billion to Gemini Earn Program (Earn) customers through the Genesis Global Capital, LLC bankruptcy proceeding.

To know more: https://lnkd.in/gpyjM44i

Launched on February 1, 2021, the Earn Program was an unsecured lending program that enabled Gemini customers to loan their virtual currency to the program’s lending partner, GGC, and receive interest in return. Gemini, acting as the Earn Customers’ agent, facilitated the transfer of the virtual currency to GGC, and then GGC was to lend those assets to institutional borrowers, which generated interest for Earn Customers.

The violations leading to the fine encompass:

•      Negligence in performing due diligence on an unregulated third party, subsequently accused of significant fraud.
•      Failure to implement robust risk management protocols and maintain sufficient liquidity reserves.
•      Non-compliance with OFAC’s Sanctions Compliance Guidance.
•      Lack of controls related to IP verification and virtual private networks (VPNs), requirements for sanctions checks.
•      Failure to conduct timely due diligence reviews of high-risk accounts.
•      Absence of an annual review for AML and transaction monitoring processes.
•      Prior to 2022, Gemini’s procedures were insufficiently tailored to address certain high-risk customer types, particularly those engaging in high-volume transactions with high-risk assets.