© Reuters. FILE PHOTO: A man walks past the logo of Gemini Trust, a digital currency exchange and custodian, during the Bitcoin Conference 2022 in Miami Beach, Florida, U.S. April 6, 2022. REUTERS/Marco Bello/File Photo
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By Hannah Lang
(Reuters) -Cryptocurrency exchange Gemini will return at least $1.1 billion to customers of its defunct lending program and pay a fine of $37 million for unsafe and unsound practices as part of a settlement with the New York Department of Financial Services (NYDFS), the regulator said on Wednesday.
Gemini’s Earn program, which was offered in partnership with crypto lender Genesis Global Capital, was halted during a crypto market crash in November 2022. That dislocation caused Genesis to file for bankruptcy, and has led to extensive litigation between Genesis, Gemini and Genesis’s parent company, Digital Currency Group (DCG).
WHY IT’S IMPORTANT
The agreement means Gemini’s Earn customers, who have not been able to access the funds held in those accounts since late 2022, are one step closer to regaining access to their money.
NYDFS said on Wednesday that it retains the right to bring further action against Gemini if the company does not fulfill its obligation to return at least $1.1 billion to customers following the resolution of Genesis’ bankruptcy. Gemini has pledged to contribute $40 million to the conclusion of Genesis’ bankruptcy in order to benefit Earn customers, the regulator said.
CONTEXT
Gemini is run by Cameron and Tyler Winklevoss – also known as the Winklevoss twins, who grabbed national attention for their legal battle against Meta Platforms (NASDAQ:META)’ 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 the chance to loan their crypto assets to Genesis in exchange for earning interest, ultimately collecting billions of dollars’ worth of crypto assets from investors.
NYDFS claimed that Gemini failed to monitor and conduct due diligence on Genesis throughout the life of the Earn program and failed to maintain adequate reserves.
KEY QUOTE
“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,” said NYDFS Superintendent Adrienne Harris in a statement. “Today’s settlement is a win for Earn customers, who have a right to the assets they entrusted to Gemini.”
RESPONSE:
In a blog post, Gemini said it has “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 delivers a coin-for-coin recovery for Earn users.”
Source: Investing.com
