Gemini Trust will return at least $1.1 billion to customers of its Gemini Earn program through the bankruptcy proceeding of crypto lender Genesis Global Capital, with which it jointly operated the program.
New York Department of Financial Services Superintendent Adrienne Harris further announced Thursday that the crypto exchange will contribute $40 million to GGC bankruptcy to benefit Earn customers; and will also pay NYDFS $37 million for “significant failures that threatened the safety and soundness of the company.”
If Gemini fails to return at least $1.1 billion to Earn customers, as part of the settlement, NYDFS can further penalize the company.
Harris said the firm “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.”
Gemini, operated by the Facebook-famed Winklevoss twins, and GGC, a subsidiary of Digital Currency Group, offered a program through which Gemini customers could loan their crypto assets to GGC and earn interest in exchange. Gemini Earn operated from February 2021 to November 2022 until GGC defaulted on roughly $1 billion in loans made to Earn customers shortly after the bankruptcy of another crypto exchange, FTX, threw the cryptosphere into a tailspin. Two months later, GGC declared bankruptcy.
NYDFS alleges that Gemini failed to conduct adequate due diligence on GGC and failed to maintain enough reserves throughout the life of the Earn program and that those failures have left 200,000 Earn customers unable to access their crypto holdings.
Gemini wrote on its website Wednesday that it expects to give customers more — $1.8 billion, by today’s crypto values — if the settlement, which offers coin-for-coin recovery, is approved by courts in GGC’s bankruptcy case.
“[I]f you had lent one bitcoin in the Earn program, you will receive one bitcoin back. And it means that you will receive any and all appreciation of your assets since you lent them into the Earn program,” Gemini wrote.
Crypto values are, as a whole, higher than they were when Earn assets were frozen on November 16, 2022. Bitcoin was valued at over $61,000 at close of trading Wednesday — not far off its all-time high above $68,000. On the day Earn assets were frozen, Bitcoin was valued at less than $17,000.
Bankruptcy proceedings to finalize the settlement could take up to two months, according to Gemini. When it’s complete, Earn customers will receive 97% of their assets, and then will receive the remaining assets within a year, according to Gemini.
