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Gemini Customers Can Expect 100% Earn Assets Returned as Winklevoss Twins Pay out $1 Billion

Last Updated February 29, 2024 5:15 PM
Eddie Mitchell
Last Updated February 29, 2024 5:15 PM
Key Takeaways
  • Gemini exchange to return over 200,000 staking platform customers’ funds.
  • The exchange has agreed to compensate 100% of lost crypto within the next 12 months.
  • Legal battles with the SEC and others still ongoing.

As per a press release  from the New York State Department of Financial Services (DFS), the Winklevoss Twins’ Gemini is now “committed” to returning customer funds that were lost from the Gemini Earn platform.

Though the settlement is not yet approved, Gemini will also contribute $40 million to the ongoing Genesis bankruptcy proceedings and another $37 million fine to the DFS in addition to the lost crypto. The DFS notes that if Gemini does not fulfill its $1.1 billion obligation, then further actions will be taken.

Gemini Returns Crypto

This comes after the exchange partnered with now-bankrupt crypto firm, Genesis, who would provide backend services for lending/earning opportunities to Gemini customers. However following the crypto crash in 2022, Genesis suffered major financial difficulties and halted withdrawals in November that year.

In a blog post , the exchange writes:

“We’ve worked tirelessly over the past 15 months to advocate for Earn users and seek the return of their assets. As a part of this settlement, Gemini is contributing $40 million to Earn users’ recovery.”

Gemini notes that when the settlement is approved by bankruptcy courts, which may take up to two months to complete, they will be repaying over $1.8 billion in today’s prices, which is $700 million more than when Earn partner Genesis blocked withdrawals.

Once approved, Earn users can expect 97% of their assets returned in kind within two months, according to Gemini, and the remainder of the debt to be settled within 12 months.

The Genesis Saga

Genesis was a large crypto trading company that suffered losses following the collapse of Three Arrows Capital in 2022 and the severe market decline that followed, for which it blames its bankruptcy.

After defaulting in November 2022 on approximately $1 billion in loans from Earn customers, affecting over 200,000 users, Genesis filed for Chapter 11 bankruptcy  in January 2023, owing over $3.5 billion to its top 50 debtors.

That said, Gemini remains accountable for exposing its customers and the overall financial health of the company to risks posed by Genesis. In the DFS announcement, Superintendent Adrienne A. Harris stated :

“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,”

Is it Over?

Not quite. New York Attorney General (NYAG) Letitia James, who had initially sued Gemini, parent company Digital Currency Group, its CEO Barry Silbert, and Genesis for allegedly defrauding investors out of that $1.1 billion sum in October 2023, amended the lawsuit  in February 2024 and is now seeking $3 billion.

The NYAG claims  this is due to more victims coming forward as a result of “fraud and deceit” perpetrated by Gemini and Genesis, which she described as an “illegal cryptocurrency scheme” that affected not only retail investors but also other investors who contributed directly to Genesis.

A separate lawsuit  was brought against Gemini and Genesis by the U.S. Securities and Exchange Commission (SEC) in January 2023, alleging the pair offered an unregistered security through the Earn product.

With a string of crypto legal battles taking place throughout 2024, the sentencing hearing of Changpeng “CZ” Zhao, Sam Bankman-Fried, and others, we can only hope that this is the last of crypto’s longstanding teething pains when it comes to adhering to rules and regulations.

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