Cryptocurrency exchanges are subject of intense scrutiny in recent days. As investors watch exchanges face probes, lay off employees and suffer from hacks, faith in these exchanges is certainly wavering, if only slightly. The Gemini exchange is one of the worst hit this week; it is becoming embroiled in a lawsuit that stacks atop other bearish news around it.
Gemini is one of the biggest centralized exchanges in the U.S. It’s the brainchild of the Winklevoss twins, investing celebrities who have made a name for themselves as vocal crypto bulls. The Winklevosses founded Gemini in 2015, three years after buying what is now one of the largest stores of Bitcoin (BTC-USD) in the world.
But while Gemini enjoys being one of the most robust platforms of crypto tools available, as well as its reputable founders, it is not immune to the same woes that affect the rest of the market. This much is proven especially true this week; the company is firing 10% of its entire workforce.
The brothers announced the controversial layoffs through a blog post last week. In it, they describe the behavior of the crypto market as “contraction phase that is settling into a period of stasis.” Because of the “contraction phase,” the brothers say they must tighten up the financial condition of Gemini.
If the market conditions weren’t bad enough, though, it looks like Gemini is about to take another blow. A lawsuit is not being levied against the exchange, and it could be worth millions.
Gemini Exchange Sued by IRA Company That Lost Millions
The Gemini exchange can continue to pile up the bearish catalysts for another day. A crypto IRA company is now coming after the exchange outfit after a hack cost the company $36 million in assets.
IRA Financial Trust is the company behind a lawsuit against Gemini. The claim stems back from a February hack on IRA Financial Trust; a bad actor was able to access the funds of retirement accounts. They stole $21 million in Bitcoin and $15 million in Ethereum (ETH-USD).
Gemini plays a major role in this turn of events because it is the custodian of IRA Financial Trust’s assets. The company complains that Gemini did not have enough fail-safes in place to prevent the hack. It adds to this that Gemini did not freeze any accounts associated with the hack immediately after it took place; had it done so, authorities would have had a far easier time recovering the stolen assets.
In response to the lawsuit, Gemini denies all of the allegations by IRA Financial Trust. The company adds to the response that “our security standards are among the highest in the industry.” IRA Financial Trust says that it will be using proceeds from the lawsuit to repay customers affected by the hack.
This isn’t the first bit of legal trouble for Gemini this year. The exchange is butting heads with the Commodity Futures Trading Commission (CFTC) as well. The CFTC is charging Gemini with making misleading statements about Bitcoin futures in order to gain permission to trade them. Specifically, the agency says Gemini did not accurately disclose whether Bitcoin futures are subject to manipulation.
On the date of publication, Brenden Rearick did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.