Gemini, the cryptocurrency exchange founded by Tyler and Cameron Winklevoss, has reached a settlement with New York regulators to return a minimum of $1.1 billion to customers of its defunct Gemini Earn Program. The agreement also includes a $40 million contribution to Genesis Global Capital’s bankruptcy proceedings and a $37 million fine to the New York Department of Financial Services (NYDFS).
Gemini had launched the Earn program in partnership with Genesis, a subsidiary of Digital Currency Group, in 2021. However, withdrawals were halted following FTX’s crash in 2022, leading Genesis to file for Chapter 11 bankruptcy in January 2023. This left more than 200,000 Earn customers unable to access their funds, with Genesis defaulting on loans worth approximately $1 billion.
Superintendent of the NYDFS, Adrienne Harris, criticized Gemini for failing to investigate its partner Genesis Global Capital thoroughly. This lack of due diligence resulted in significant financial harm to Earn customers, as they were suddenly unable to access their assets after Genesis experienced a financial meltdown. The NYDFS warned that further action could be taken against Gemini if the minimum repayment of $1.1 billion was not made to Earn users after Genesis’s bankruptcy resolution.
Gemini has assured Earn users that they will receive “100% of their digital assets back in kind” following a settlement on principle with Genesis and other creditors. The exchange expects users to receive around 97% of their assets within approximately two months after approval, with the remaining balance to be returned within the next 12 months, subject to court approval.
Although Gemini has settled with the NYDFS, it still faces legal actions from the US Securities and Exchange Commission (SEC) and the New York Attorney General Letitia James. The Attorney General sued DCG, Genesis, and Gemini for an alleged $1 billion fraud related to Gemini Earn, with the figure later increased to $3 billion in February 2024 as more investors reported losses.
The settlement between Gemini and NY regulators marks a significant step towards resolving the issues surrounding the defunct Gemini Earn Program. While the exchange has committed to repaying affected users, it still faces legal challenges from other regulatory bodies. Moving forward, Gemini must demonstrate greater due diligence in its partnerships and operations to regain trust in the cryptocurrency community and avoid similar incidents in the future.
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