© Reuters. FILE PHOTO: A man walks past the logo of Gemini Trust, a digital currency custodian and exchange, during the Bitcoin 2022 Conference in Miami Beach, Florida, U.S., April 6, 2022. REUTERS/Marco Bello/ stock photo
By Hannah Lang
(Reuters) – Cryptocurrency exchange Gemini will return at least $1.1 billion to customers of its defunct lending program and pay a $37 million fine for unsafe and unsound practices as part of a settlement with the Department of Services. New York Financial Institutions (NYDFS), the regulator said on Wednesday.
Gemini's Earn program, which was offered in partnership with cryptocurrency lender Genesis Global Capital, was halted during a cryptocurrency market crash in November 2022. That dislocation caused Genesis to file for bankruptcy and has led to an extensive litigation between Genesis, Gemini and Genesis' parent company. , Digital Currency Group (DCG).
BECAUSE IT IS IMPORTANT
The deal means Gemini's Earn customers, who have been unable to access funds held in those accounts since late 2022, are one step closer to regaining access to their money.
NYDFS said Wednesday that it reserves the right to take further action 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 committed to contribute $40 million through the conclusion of Genesis' bankruptcy to benefit Earn's clients, the regulator said.
CONTEXT
Gemini is led by Cameron and Tyler Winklevoss, also known as the Winklevoss twins, who attracted national attention for their legal battle against Meta Platforms (NASDAQ:) CEO Mark Zuckerberg. The company had previously sued DCG over the failure of their crypto lending joint venture.
The two companies partnered in December 2020 to allow Gemini customers the opportunity to lend their crypto assets to Genesis in exchange for earning interest and ultimately raising billions of dollars in crypto assets from investors.
NYDFS claimed that Gemini failed to monitor or perform due diligence on Genesis during 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 clients who were suddenly unable to access their assets after Genesis Global Capital experienced a financial crisis,” NYDFS Superintendent said , Adrienne Harris, in a statement. “Today's settlement is a victory for Earn's clients, who are entitled to the assets they entrusted to Gemini.”
ANSWER:
In a blog post, Gemini said it has “worked tirelessly over the past 15 months to defend 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 offers coin-for-coin recovery for Earn users.”
