Gemini to Reimburse Customers $1.1 Billion Following Regulatory Settlement
Gemini Trust, a cryptocurrency exchange established by Cameron and Tyler Winklevoss, has reached a settlement with a New York regulator to repay a minimum of $1.1 billion to participants in its defunct lending program.
This agreement also entails Gemini paying a fine of $37 million to the regulator for what the New York Department of Financial Services (NYDFS) described as “significant failures endangering the company’s stability and integrity,” according to a statement released on Wednesday.
The NYDFS has asserted its authority to pursue further legal action against Gemini should the company fail to fulfill its commitments, as stated in the official announcement.
Operated by the Winklevoss twins, best recognized for their protracted legal battle against Meta’s Mark Zuckerberg over Facebook’s origins, Gemini has announced via a blog post on Wednesday that customers enrolled in its lending initiative, Gemini Earn, would receive a full restitution of their digital assets along with any accrued appreciation in value.
Gemini Earn had promoted itself as a secure investment avenue, allowing users to lend their cryptocurrency holdings to another entity, Genesis Global Capital (GGC), in exchange for interest payments reaching up to 8%.
In its blog post, Gemini disclosed its intention to return more than $1.8 billion worth of value to customers, based on current market prices, an amount surpassing by $700 million the value at the time when GGC suspended withdrawal operations in November 2022.
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This suspension coincided with a turbulent period for the trillion-dollar cryptocurrency market, precipitated by the collapse of FTX, a once-prominent crypto exchange. In November, FTX’s co-founder, Sam Bankman-Fried, faced conviction on seven charges of fraud and conspiracy related to the downfall of the exchange. Bankman-Fried’s legal team submitted a memorandum to a Manhattan federal court on Tuesday suggesting a prison term ranging from five to six-and-a-half years. Under federal sentencing guidelines, he could potentially face up to 110 years in prison. His sentencing is slated for March 28.
While Wednesday’s settlement marks a significant development for Gemini, the exchange still confronts ongoing legal challenges. Notably, in October, New York’s attorney general initiated a lawsuit against three entities—Gemini, GCC, and Digital Currency Group, the parent company of GCC—accusing them of deceiving investors and concealing losses exceeding $1 billion.
