Gemini, the cryptocurrency exchange led by Tyler and Cameron Winklevoss, has settled with New York regulators, signifying a step toward the return of funds to customers of its defunct Gemini Earn Program.
As part of the settlement agreement with the New York Department of Financial Services (NYDFS), Gemini has committed to repaying a minimum of $1.1 billion to customers affected by the closure of the Gemini Earn Program. The settlement also includes a $40 million contribution to Genesis Global Capital’s bankruptcy proceedings and a $37 million fine imposed by the NYDFS.
The Genesis Global Capital partnership was initiated when Gemini launched the Earn program in 2021. However, following the crash of FTX in 2022, Genesis suspended withdrawals, leading to significant repercussions for Gemini Earn users. Subsequently, Genesis filed for Chapter 11 bankruptcy in January 2023, defaulting on loans valued at approximately $1 billion, leaving over 200,000 Earn customers unable to access their funds.
Superintendent Adrienne Harris of the NYDFS expressed concern over Gemini’s failure to conduct due diligence on Genesis Global Capital, emphasizing that this lapse resulted in substantial financial harm to Earn customers. Harris noted that Gemini’s oversight had allowed an unregulated third party, later accused of massive fraud, to impact Earn customers adversely.
The NYDFS maintains the right to pursue further action against Gemini if the exchange fails to fulfill its commitment of returning a minimum of $1.1 billion to Earn users following the resolution of the Genesis bankruptcy.
Gemini, in a post-settlement statement, assured Earn users that they would receive “100% of their digital assets back in kind” upon approval by the bankruptcy court. Pending approval, Earn customers can expect to receive approximately 97% of their assets within two months and the remaining balance within the next 12 months.
Despite settling with the NYDFS, Gemini faces ongoing legal challenges from the U.S. Securities and Exchange Commission (SEC) and the New York Attorney General Letitia James. In a lawsuit initiated in October 2023, James alleged a $1 billion fraud related to Gemini Earn, later increasing the claimed amount to $3 billion in February 2024, citing additional reported losses by investors.
