The Winklevoss twins’ crypto company Gemini will return at least $1.1 billion to customers of its doomed “Earn” lending program and $37 million for “material” compliance violations as part of a settlement with regulators on Wednesday. agreed to pay a fine.
Gemini, founded by the twins after a high-profile feud with Mark Zuckerberg over who invented Facebook, is now bankrupt Gemini Earn’s financing partner Genesis, according to the New York State Treasury Department. “We weren’t able to scrutinize it enough or monitor it enough,” he said. service.
acquisition program Charge up to 8% interest on customers’ crypto deposits; However, Genesis was caught up in the meltdown of disgraced fraudster Sam Bankman Freed’s FTX empire and collapsed in November 2022 when it was unable to make withdrawals in time.
Since then, more than 200,000 Earn customers have been unable to access their money, including about 30,000 New Yorkers.
State regulators said they determined Gemini “engaged in unsafe and unsound conduct that ultimately jeopardized the company’s financial health.”
NYSDFS Superintendent Adrian Harris said in a statement: “Gemini failed to conduct due diligence on unregulated third parties, was later accused of massive fraud, and suddenly lost assets after the financial collapse of Genesis Global Capital. This has harmed Earn’s customers who have lost access.” “
Today’s settlement is a victory for Arn customers who have rights to the assets they entrust to Gemini. ”
During the crisis, an unregulated affiliate called Gemini Liquidity allegedly collected “hundreds of millions of dollars in fees from Gemini’s customers that were supposed to go to Gemini, but which were then used to compromise Gemini’s financial health.” It made it significantly worse.”
The regulator also said it had “identified further various management and compliance deficiencies” but did not elaborate.
As part of the settlement, Gemini also agreed to contribute $40 million to Genesis’ bankruptcy proceedings for the benefit of Arn’s customers.
NYSDFS stated that it “will have the right to file further lawsuits against Gemini if Gemini fails to fulfill its obligation to return at least $1.1 billion to Earn customers following the resolution.” [Genesis] bankruptcy. “
In a lengthy statement published on X, Gemini said the settlement “will result in all earn users receiving 100% of their digital assets in-kind within the next 12 months.”
The company added that the settlement requires final documentation and the bankruptcy court approval process could take up to two months.
“Gemini appreciates the role of the New York Department of Financial Services (DFS) in this settlement, which resulted in a coin-for-coin recovery for earn users,” the company said.
The Post has reached out to Gemini for further comment.
Last October, New York Attorney General Letitia James accused Digital Currency Group, the parent company of Gemini and Genesis, of defrauding Earn customers, calling them “bad actors.”
James expanded his lawsuit earlier this month, tripling the scope of the alleged fraud to a whopping $3 billion.
The lawsuit was filed weeks after the Post reported that Gemini secretly withdrew $282 million in cryptocurrency from Genesis on August 9, 2022, well before Genesis’ collapse.
The twins later claimed that this step was taken in the interest of their customers.
Nevertheless, Arn customers are outraged by the Twins’ actions, with one scorned investor telling the Post, “There’s no good way Gemini can pull this off.”
The SEC is also suing Gemini and Genesis in separate cases, alleging that the Earn program was an unregistered security.
The implosion of Earn was a major setback for the Winklevoss brothers and their ambitions to become a major player in the sector.
Gemini had staked its reputation on the premise of being a trusted operator in the freewheeling and largely unregulated cryptocurrency industry.
