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© Reuters. FILE PHOTO: A man walks past the logo of Gemini Trust, a digital currency exchange and custodian, during the 2022 Bitcoin Conference in Miami Beach, Florida, the United States, April 6, 2022. REUTERS/Marco Bello/File photo
By Hannah Lang
(Reuters) – Cryptocurrency exchange Gemini will repay at least $1.1 billion to customers of its discontinued lending program and a $37 million fine for unsafe and unsound loans as part of a settlement with the New York Department of Financial Services (NYDFS). Practices pay, the regulator said on Wednesday.
Gemini’s Earn program, offered in partnership with crypto lender Genesis Global Capital, was halted during a crypto market crash in November 2022. This disruption caused Genesis to declare bankruptcy and led to extensive litigation between Genesis, Gemini, and Genesis’ parent company, Digital Currency Group (DCG).
WHY IT’S IMPORTANT
The agreement means Gemini’s Earn customers, who have been unable to access funds held in these accounts since late 2022, are one step closer to regaining access to their money.
NYDFS said Wednesday that it reserves the right to file additional lawsuits against Gemini if the company fails to meet its obligation to return at least $1.1 billion to customers following the resolution of Genesis’ bankruptcy. Gemini has agreed to contribute $40 million toward the completion of Genesis’ bankruptcy to help Earn’s customers, the regulator said.
CONTEXT
Gemini is led by Cameron and Tyler Winklevoss – also known as the Winklevoss twins, who gained national attention for their legal battle against Meta Platforms (NASDAQ:) CEO Mark Zuckerberg. The company had previously sued DCG over the failure of their joint crypto lending partnership.
The two companies partnered in December 2020 to allow Gemini customers to loan their crypto assets to Genesis in exchange for interest income, ultimately raising billions of dollars’ worth of crypto assets from investors.
NYDFS alleged that Gemini failed to monitor and conduct due diligence on Genesis throughout the life of the earn program and failed to maintain sufficient reserves.
KEY QUOTE
“Gemini failed to conduct due diligence on an unregulated third party that was later accused of massive fraud, harming Earn customers who suddenly lost access to their assets after Genesis Global Capital experienced a financial collapse “NYDFS Superintendent Adrienne Harris said in a statement. “Today’s settlement is a win for Earn customers who have a right to the assets they have entrusted to Gemini.”
ANSWER:
In a blog post, Gemini said it had “worked tirelessly over the past 15 months to advocate for Earn users and seek the return of their assets.”
“Gemini thanks the New York Department of Financial Services (DFS) for its role in this settlement, which provides Earn users with coin-for-coin recovery.”
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