Winklevoss’ Gemini To Return More Than $1bn To Customers

The Winklevoss twins’ cryptocurrency firm Gemini has agreed to pay more than $1 billion (£790m) to customers of its failed Earn product in a settlement with the New York Department of Financial Services.

The firm is also to pay a $37m fine for “significant failures that threatened the safety and soundness of the company”, the authority said.

The NYDFS said Gemini “failed to conduct due diligence” on the third-party company involved in the product, digital currency lender Genesis Global Capital, which entered bankruptcy in January 2023.

The payments of at least $1.1bn represent a full restoration of customers’ funds that were frozen when the Earn programme failed in November 2022.

Crypto crash

Genesis, the Gemini partner that effectively operated Earn, halted customer withdrawals at that time amidst a broader crypto industry collapse that included the bankruptcy of major exchange FTX.

Gemini, founded by twins Tyler and Cameron Winklevoss, known for their long-running dispute with Facebook and Mark Zuckerberg, primarily operated as an exchange until launching the Earn programme that allowed customers to lend out cryptocurrencies for a yield of up to 13 percent.

Its sole counterparty in the arrangement was Genesis, the lending unit of parent company Digital Currency Group, which lent to firms such as hedge fund Three Arrows Capital and FTX-linked Alameda Research.

Genesis’ bankruptcy brought it into legal conflict with both Gemini and parent compay DCG.

‘Massive fraud’

“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.”

Gemini said it was “pleased” that a settlement had been reached “in principle” and that it planned to return more than $1.8bn to customers, $700m more than when Genesis halted withdrawals on 16 November 2022.

Gemini said in a blog post it had “worked tirelessly over the past 15 months to advocate for Earn users and seek the return of their assets”.

SEC lawsuit

It said it would contribute $40m to Genesis’ bankruptcy proceedings to benefit Earn customers.

The NYDFS said it could bring further action against Gemini if it did not return at least $1.1bn to customers.

In January 2023 Gemini and Genesis were charged by the US Securities and Exchange Commission with illegally selling crypto assets to thousands of investors through Earn.

Genesis has since settled with the SEC, but its lawsuit against Gemini is ongoing.