- Gemini agrees to pay $1.1 billion to reimburse Earn customers and a $37 million NYDFS fine.
- Earn program faced challenges after the crypto market downturn and Genesis bankruptcy.
- Settlement is seen as a significant victory for Earn customers, with potential further NYDFS actions.
Gemini, a cryptocurrency exchange, has reached a settlement with the New York Department of Financial Services (NYDFS), committing to reimburse customers of its now-closed lending scheme at least $1.1 billion (£870 million). In addition, the company is required to pay a penalty of $37 million due to major shortcomings identified by the NYDFS.
This agreement comes after Gemini’s Earn program was suspended amid a cryptocurrency market downturn in November 2022. The platform, initiated by twins Tyler and Cameron Winklevoss, who are famously recognized for their lawsuit against Facebook, faced significant challenges leading to this settlement.
“Gemini failed to conduct due diligence on an unregulated third party, later accused of massive fraud, harming Earn customers who were suddenly unable to access their assets after Genesis Global Capital experienced a financial meltdown.”
NYDFS Superintendent Adrienne Harris
The New York Department of Financial Services (NYDFS) has described the agreement as a significant victory for the participants of the Earn program, emphasizing their entitlement to the recovery of assets they deposited with Gemini. The regulatory body also highlighted the possibility of further actions against the exchange should it fail to reimburse customers with at least $1.1 billion.
In response, Gemini, through a blog post, expressed that it has devoted considerable effort over the preceding 15 months to support Earn users and facilitate the restitution of their investments. The company announced its intention, pending approval, to distribute over $1.8 billion in assets at current market values. This amount exceeded the original value by $700 million at the time when Genesis, a key partner in the Earn program, ceased its withdrawal operations on November 16, 2022.
Furthermore, Gemini announced its decision to allocate $40 million towards the resolution of Genesis Global Capital’s bankruptcy proceedings, aiming to favor the participants of the Earn program. The Earn initiative, a collaboration with the cryptocurrency lending firm Genesis Global Capital, was suspended in November 2022. Subsequently, Genesis declared bankruptcy, leading to a complex legal battle involving Genesis, Gemini, and the Digital Currency Group, Genesis’ parent organization. Since the end of 2022, customers of Gemini Earn have been unable to access their funds, but the recent settlement marks a significant step towards the recovery of their investments.
Gemini, led by Tyler and Cameron Winklevoss, who are notable for their protracted legal confrontation with Facebook and its CEO Mark Zuckerberg, has faced challenges beyond the Earn program. In January 2023, Gemini and Genesis were accused by U.S. regulators of engaging in the illegal sale of crypto assets to a vast number of investors. According to the allegations, the companies violated regulatory statutes by offering and selling these assets via the Earn program, which was introduced in 2021.
