Gemini and IRA Financial Trust reached a settlement over a suit brought by the latter in 2022 because of the exchange’s questionable security practices. Essentially, a bad actor gained access to IRA’s master key on Gemini and stole funds from the various accounts overseen by IRA, which comprised life savings belonging to senior citizens. It claimed that the cryptocurrency exchange had opaque security implementations, not allowing it to realize that Gemini had a single point of failure, which allowed the hacker to commit the crime. “IRA selected Gemini as the exchange to secure customers’ crypto assets largely because of Gemini’s detailed statements about its industry-leading focus on security,” it said in its 2022 filing. It added, “Gemini strongly pressured IRA to switch from using
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Gemini and IRA Financial Trust reached a settlement over a suit brought by the latter in 2022 because of the exchange’s questionable security practices. Essentially, a bad actor gained access to IRA’s master key on Gemini and stole funds from the various accounts overseen by IRA, which comprised life savings belonging to senior citizens.
It claimed that the cryptocurrency exchange had opaque security implementations, not allowing it to realize that Gemini had a single point of failure, which allowed the hacker to commit the crime. “IRA selected Gemini as the exchange to secure customers’ crypto assets largely because of Gemini’s detailed statements about its industry-leading focus on security,” it said in its 2022 filing.
It added, “Gemini strongly pressured IRA to switch from using Gemini’s web-based platform to the Gemini API—Application Programming Interface—which Gemini said would streamline the process of onboarding customers.”
Regarding why it was suing Gemini, “Contrary to Gemini’s many representations about security, Gemini designed its API with a single point of failure. If breached, this single point of failure allowed a bad actor to steal all crypto assets held by the customers of an institutional customer, like IRA.”
Two years later, the suit was dismissed by the United States District Court for the Southern District of New York as both parties have settled. However, financial details about the agreement are yet to be disclosed.
Not too long ago, Gemini also settled with the New York Department of Financial Services (NYDFS) and the New York Attorney General’s Office for selling illegal securities to New York residents through its ‘Earn’ program. Attorney General Letitia James recovered $50 million to be distributed to Earn users. Furthermore, NYDFS has demanded the exchange to pay an additional $1.1 billion to Earn users as compensation.