Gemini Settles With New York DFS, Commits to Return $1.1 Billion to Earn Customers
Crypto exchange Gemini has agreed to return a minimum of $1.1 billion to customers of its defunct Gemini Earn Program as part of its settlement deal with New York regulators.
Gemini, led by Tyler and Cameron Winklevoss, is also facing legal issues from the US Securities and Exchange Commission (SEC) and the New York Attorney Generals office.
Geminis Settlement With the NYDFS
In a press release on Feb. 28, the New York Department of Financial Services (NYDFS) announced its settlement with Gemini, which included the repayment of at least $1.1 billion to Earn users, a $40 million contribution to Genesis Global Capitals bankruptcy proceedings, and a fine of $37 million to the agency.
Gemini launched the Earn program in 2021, with Genesis, an arm of Digital Currency Group (DCG), as its partner. However, FTXs crash in 2022 subsequently caused Genesis to halt withdrawals, thereby affecting Gemini Earn users. The lender later filed for Chapter 11 bankruptcy in January 2023.
According to the DFS, Genesis defaulted on loans valued at about $1 billion, with more than 200,000 Earn customers unable to access their funds.
Superintendent of the New York DFS, Adrienne Harris, in a statement, called out Geminis costly blunder, saying the company failed to thoroughly investigate its partner Genesis Global Capital, an oversight that caused significant financial harm to Earn customers.
Gemini failed to conduct due diligence on an unregulated third party, later accused of massive fraud, harming Ean customers who were suddenly unable to access their assets after Genesis Global Capital experienced a financial meltdown.
The NYDFS also said it reserved the right to take further action against the company if it failed to return a minimum of $1.1 billion to Earn users after the resolution of the Genesis bankruptcy.
Legal Troubles Not Over
Gemini said in a post that Earn users will receive 100% of their digital assets back in kind after reaching a settlement on principle with Genesis and other creditors.
While the settlement is subject to approval by the bankruptcy court, Gemini added that Earn customers can expect to receive approximately 97% of their assets in kind within about two months after approval. And they can expect to receive their remaining asset balance within the next 12 months.
Although Gemini may have settled with the NYDFS, the exchange still has to deal with legal actions from the US SEC and the New York Attorney General Letitia James.
In October 2023, James sued DCG, Genesis, and Gemini for an alleged $1 billion fraud in relation to Gemini Earn but increased the figure to $3 billion in February 2024, stating that more investors reported losses.
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Text source: CryptoPotato
