Gemini, the cryptocurrency exchange founded by the Winklevoss twins, has finally returned a significant portion of funds to users of its now-defunct Earn lending program.
The distribution, amounting to $2.18 billion in digital assets, represents a 232% recovery and 97% of the assets owed to Earn users.
TLDR
- Gemini has distributed $2.18 billion in digital assets to users of its now-defunct Earn lending program, representing a 232% recovery and 97% of the assets owed.
- The distribution comes after an 18-month freeze on withdrawals due to Gemini’s partner, Genesis Global Capital, suspending withdrawals amid a liquidity crisis.
- Gemini and Genesis have been involved in lawsuits with the SEC and the New York Attorney General over the Earn program, with accusations of unregistered securities offerings and misleading investors.
- Genesis Global Capital filed for bankruptcy in January 2023, after suffering losses from the collapses of Three Arrows Capital and FTX in 2022.
- Gemini co-founder Tyler Winklevoss called the Genesis bankruptcy “old-fashioned financial fraud compounded by a lack of regulatory clarity.”
The Earn program, launched in 2021, allowed Gemini customers to loan their cryptocurrencies to Genesis Global Capital, LLC, a crypto lending firm.
In return, users could earn up to 7.4% annual percentage yield (APY) on their deposits. However, in November 2022, Genesis suspended withdrawals due to a liquidity crisis, leading Gemini to halt withdrawals from the Earn program.
For over 18 months, Earn users were unable to access their funds, causing significant frustration and hardship. The situation was further complicated by the bankruptcy of Genesis Global Holdco, Genesis Global Capital’s parent company, in January 2023.
Genesis’s financial troubles were exacerbated by the collapses of crypto hedge fund Three Arrows Capital and the infamous FTX exchange in 2022.
The distribution of funds to Earn users is the result of a settlement reached between Gemini, Genesis, and other creditors during the bankruptcy process.
According to Gemini, the settlement ensures that Earn users will receive 100% of their digital assets back in kind. This means that if a user had lent one bitcoin through the Earn program, they will receive one bitcoin back, including any appreciation in value since the initial deposit.
The saga surrounding the Earn program has not been without legal complications. The U.S. Securities and Exchange Commission (SEC) sued Gemini and Genesis in January 2023, alleging that the Earn program constituted an unregistered offer and sale of securities under U.S. law. Both companies have moved to dismiss the lawsuit.
The New York Attorney General’s Office has also taken legal action against Gemini, Genesis Global Holdco, and their parent company, Digital Currency Group, over the crypto lending program.
In February, Gemini agreed to pay a $37 million fine and return $1.1 billion to Earn customers as part of a settlement with the New York State Department of Financial Services.
Despite the legal battles, Gemini co-founder Tyler Winklevoss praised the settlement, stating,
“From the start, Gemini’s goal was to obtain the return of 100% of its users’ digital assets from Genesis, and Gemini was dedicated to a coin-for-coin recovery.”
However, Winklevoss also criticized the Genesis bankruptcy, calling it “old-fashioned financial fraud compounded by a lack of regulatory clarity.”
This statement highlights the ongoing debate surrounding regulatory oversight in the cryptocurrency industry and the need for clear guidelines to protect investors.
