- Gemini has unveiled plans to repay Earn customers in full.
- The plans are part of a settlement with New York regulators.
- Earn customers have been unable to access their deposits for about 15 months.
The Gemini Earn nightmare looks set to end for users. After over a year of being stuck with their assets in limbo, a recent Gemini update suggests that users are on the verge of a full recovery.
Gemini Shakes Hands With New York DFS
On Wednesday, February 28, Gemini announced plans to make 100% restitution to users of its failed Earn product in kind, pending the approval of the bankruptcy court overseeing the Genesis case.
“This means, for example, that if you had lent one bitcoin in the Earn program, you will receive one bitcoin back,” the firm wrote.
Per Gemini’s unveiled plan, users could expect to receive 97% of their assets within two months, while the remaining will come in the next 12. Gemini expects to make payments totaling $1.8 billion in all at current rates, $700 million more than the estimated value of customer losses when Genesis halted withdrawals in November 2022. The bump comes as most crypto asset prices have significantly increased over the past year.
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The recent plan is part of a settlement with the New York Department of Financial Services (DFS). In addition to paying customers in full, the settlement requires the exchange to contribute $40 million to the Genesis bankruptcy proceeding and pay $37 million in fines “for significant failures that threatened the safety and soundness of the company.”
According to DFS Superintendent Adrienne A. Harris, who described the settlement as a “win for customers,” Gemini failed to conduct due diligence on Genesis, eventually leading to the fraud that led to the loss of over $1 billion in customer funds.
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The DFS noted that it retained the right to prosecute Gemini should the exchange fail to live up to its end of the bargain after the resolution of Genesis’ bankruptcy.
A 15-Month Long Debacle
Gemini launched the Earn product in 2020, allowing customers to earn interest on their crypto assets. Underlying the product was a mechanism that saw Gemini invest customer assets with Genesis. Genesis, in turn, lent these deposits to a client list that included the now-defunct crypto hedge fund Three Arrows Capital and FTX sister trading firm Alameda Research.
With the collapse of FTX and Alameda in November 2022, Genesis could no longer redeem customer withdrawal requests, including about $1.1 billion in Gemini customers’ crypto assets. The crypto lending desk eventually filed for bankruptcy in January 2023.
Amid efforts by Gemini to recoup customer funds from Genesis, both firms have been slapped with multiple lawsuits. In January 2023, the SEC charged both firms for allegedly offering unregistered securities through the Earn product. In October 2023, the New York Attorney General’s office piled in with fraud charges.
While Gemini remains embroiled in both lawsuits, Genesis reached a $21 million settlement with the SEC on February 1, 2024.
On the Flipside
- The plan remains subject to the bankruptcy court’s approval.
- Even if the plan is successful, Gemini’s legal issues in the U.S. remain with unresolved cases with the SEC and the NYAG.
Why This Matters
When Genesis halted withdrawals, over 200,000 Gemini customers were left holding the bag. The recent settlement brings these customers another step closer to recovery.
Read this for more on the Gemini and Genesis case:
Genesis Sues Gemini to Recover $689M Preferential Transfers
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