Wall Street titan JPMorgan Chase & Co. will reportedly sever its banking relationship with crypto exchange Gemini, a person familiar with the matter said.
The bank started its relationship with New York-based Gemini Trust Co. during the Covid-19 pandemic in May 2020.
JPMorgan Did Not Process Crypto Transactions for Gemini
Gemini, the New York-based exchange, has denied the allegations.
JPMorgan handled cash-management services for the exchange. It also processed transactions denominated in U.S. dollars for Gemini’s American customers, facilitating wire transfers through an electronic funds transfer system. The bank notably did not perform cryptocurrency transactions for the exchange.
Instead, JPMorgan Chase processed payments for Gemini customers to fund their accounts on the exchange using bank accounts. The exchange would do fiat to crypto conversions using a payment rail like the recently-discontinued Silvergate Exchange Network.
JPMorgan reportedly agreed to onboard the firm because of the latter’s registration with the New York financial regulator. The bank’s relationship with the exchange’s rival, Coinbase, is still intact.
The news comes as several crypto firms have abandoned relationships with Silvergate Capital, which recently shut down the Silvergate Exchange Network that enabled crypto exchange customers to buy and redeem crypto seven days a week.
Coinbase said it would move its business to other banking partners after Silvergate announced that it would discontinue the network.
Gemini Founders’ Reputations Mostly Intact After Successful Bankruptcy Negotiations
Gemini attracted clientele partly because of the reputations of billionaire twins Cameron and Tyler Winklevoss, who were seen as a clean-cut antithesis of the “move fast and break things,” ethos espoused by fellow Harvard alum Mark Zuckerberg during Facebook’s early days.
It recently landed in hot water with the New York State Financial Services Department for allegedly misleading customers into thinking that the Federal Deposit Insurance Corporation insured their deposits on Gemini.
The U.S. Securities and Exchange Commission recently charged Gemini for offering its Earn product to U.S. customers. Crypto deposits could earn up to 8% on the platform. Tyler Winklevoss referred to the SEC charges as a “parking ticket.”
Until a month ago, Gemini was locked in a battle with lender Genesis Global Capital to reimburse customers of Gemini’s interest-bearing Earn product.
The business partners agreed in early Feb. 2023 that Gemini would contribute $100 million to the creditors.
Genesis’ parent, the Digital Currency Group, agreed to convert a $1.1 billion promissory note to preferred stock as part of Genesis’ ongoing Chapter 11 bankruptcy.
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