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Gemini Trust Company, the cryptocurrency exchange founded by billionaires Cameron and Tyler Winklevoss, will refund $1.1 billion to customers who invested in its defunct loan program, New York regulators said Wednesday. did.
In addition, Gemini will pay a $37 million fine to the New York State Department of Financial Services (NYDFS) for “serious failures that jeopardized the safety and soundness of the company,” regulators said.
“Gemini failed to conduct due diligence on unregulated third parties, later accused of large-scale fraud, to the detriment of Earn customers who suddenly lost access to their assets following the bankruptcy of Genesis Global Capital.” said Superintendent Adrian A. Harris in a statement.
Gemini’s Earn Program was offered in partnership with crypto finance company Genesis Global Capital, but was suspended due to the crypto market crash in November 2022. The turmoil led to Genesis filing for bankruptcy and extensive litigation between Genesis, Gemini, and Genesis’ parent company. , Digital Currency Group (DCG).
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A man walks past the logo of Gemini Trust, a digital currency exchange and management company, during the Bitcoin Conference 2022 in Miami Beach, Florida, USA on April 6, 2022.
New York regulators said Gemini allowed customers to lend cryptocurrencies to Genesis, an “unregulated third party not licensed by the department.” Genesis then acquired those assets and rented them out to its own customers.
Earn’s customers were promised interest payments but lost money when Genesis defaulted on a loan worth about $1 billion in November 2022.
Genesis declared bankruptcy two months later, leaving more than 200,000 Earn customers without access to the digital currency.
The settlement means Gemini’s Earn customers may soon be able to access these funds.
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Tyler and Cameron Winklevoss founded Gemini Trust Company in 2014. (Stephanie Keenan/Getty Images, Hauser & Wirth/Getty Images)
NYDFS announced Wednesday that it reserves the right to file further lawsuits against Gemini if Gemini fails to meet its obligations to return at least $1.1 billion to customers following Genesis’ bankruptcy resolution. Gemini has committed to contributing $40 million to Genesis’ exit from bankruptcy to benefit Arn’s customers, regulators said.
“Today’s settlement is a victory for Arn customers who have rights to the assets they entrust to Gemini,” Ms. Harris said.
The Winklevoss twins, who own and operate Gemini, are best known for suing Meta CEO Mark Zuckerberg over Facebook’s early days.
Gemini responded to the NYDFS announcement with a post on X, the platform formerly known as Twitter.
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In this illustration taken on June 29, 2021, the cryptocurrencies Bitcoin, Ethereum, and Dogecoin are placed on a PC motherboard. (Reuters/Dado Ruvik/File Photo/Reuters Photo)
“Today, we are pleased to announce that we have finally reached an in-principle settlement with Genesis and other creditors in the Genesis bankruptcy. You’ll get a 100% refund.” That’s kind of you,” Gemini said.
The company said the settlement, if approved, would return more than $1.8 billion in value to customers at current digital currency prices.
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“Going forward, if the bankruptcy court broadly approves the settlement announced today, Earn users can expect to receive approximately 97% of their assets in-kind within approximately two months, with the remaining asset balance available over the next 12 months. You can expect to receive it within the next few days,” Gemini said.
Gemini added that the bankruptcy court proceedings necessary to approve the settlement could take up to two months to complete.
Reuters contributed to this report.
