New York Attorney General Letitia James recovered $50 million in digital assets from Gemini Trust Co. to pay some 230,000 investors allegedly defrauded by its Gemini Earn program, her office announced Friday.
The cryptocurrency firm, alongside separate crypto company Genesis Global Capital, offered a program from February 2021 to November 2022 through which Gemini customers could loan their crypto assets to GGC and earn interest in exchange. But they neglected to inform investors of risks associated with the program, James alleged.
The settlement gives full recovery to investors who were unable to withdraw from the program when it collapsed. It represents the final 3% of assets owed to Earn investors and will be received by June 21.
“Hundreds of thousands of people, including at least 29,000 New Yorkers, had their trust broken and their money swindled by Gemini through its bogus Earn program,” said James in a prepared statement. “Gemini marketed its Earn program as a way for investors to grow their money, but actually lied and locked investors out of their accounts.”
The settlement “will make defrauded investors whole and should remind cryptocurrency companies that deceiving investors is illegal and will not be tolerated by my office,” she said.
On Friday, Gemini tweeted that it was “excited to deliver this full recovery to you and appreciate your ongoing patience and support throughout this process.”
The settlement, which follows James’ separate $2 billion settlement with Genesis announced in May, bans Gemini from ever operating a crypto lending company in New York. It also requires Gemini to cooperate with James’ legal case against Genesis’ parent company Digital Currency Group, DCG CEO Barry Silbert and Genesis’ former CEO Soichiro Moro.
James’ investigation revealed that Gemini knew about problems with Genesis’ financials, including that Genesis’ loans were undersecured and at one time concentrated with FTX sister company Alameda Research. However, they kept that information from investors. The Earn program collapsed when GGC defaulted on roughly $1 billion in loans made to Earn customers shortly after FTX went belly-up and sent the crypto world into a tailspin.
As a result of the settlement, Gemini Earn investors will be able to access their crypto assets in their accounts. They don’t need to do anything to ensure asset recovery.
