New York-based cryptocurrency exchange Gemini announced late Wednesday that it had reached an agreement with the bankruptcy of cryptocurrency lending company Genesis, under which users of the platform’s Earn program will return $1.1 billion in digital assets.
Gemini said it has finally reached a settlement with Genesis and other creditors that will ensure that all Earn users will be able to return their digital assets in 100%.
Gemini is a cryptocurrency exchange that provides a variety of financial services. Also known as Gemini Trust Company, it was founded by Cameron and Tyler Winklevoss in 2014. In addition to being a cryptocurrency exchange, its services include cryptocurrency staking, cryptocurrency wallets, cold storage, credit card services, and the Nifty Gateway NFT marketplace.
According to its website, a key feature of Gemini is its emphasis on security and compliance. The platform uses industry-leading security measures such as cold storage of most digital assets, two-factor authentication, and encryption to protect user information. In addition, as a regulated entity, Gemini adheres to strict compliance standards, including Anti-Money Laundering (AML) and Know Your Customer (KYC) protocols.
Although Gemini is a regulated entity and emphasizes compliance, in October 2023, the New York Attorney General's Office (NYAG) filed a lawsuit against Gemini, digital asset lending company Genesis, and Digital Currency Group in the U.S. Bankruptcy Court for the Southern District of New York, accusing them of defrauding investors.
At the time, New York Attorney General Letitia James said: “These cryptocurrency companies lied to investors and attempted to conceal more than a billion dollars in losses. Middle-class investors bore the brunt of this deception.”
She added that hard-working New Yorkers and investors across the country lost more than a billion dollars because they were misled into believing that their investments in Gemini Earn were safe and profitable.
There was a ripple effect in the cryptocurrency market after the collapse of the FTX cryptocurrency exchange in 2022. One of the affected companies was Genesis Trading, which suspended its lending services in November 2022 and warned customers of possible bankruptcy.
Subsequently, Gemini sued Genesis for control of the $1.6 billion Grayscale Bitcoin Trust shares. Gemini said that participants in the Earn project will receive the same amount of digital assets as the Bitcoin they originally lent, as well as any appreciation since then. Gemini pointed out: "If approved, we will return more than $1.8 billion in value (at today's prices), which is $700 million more than when Genesis stopped withdrawals on November 16, 2022."
The required bankruptcy court proceedings could take up to two months to complete.
As part of the settlement, Gemini announced that the exchange will contribute $40 million towards the recovery of user funds. Once approved, Earn users can expect to receive approximately 97% of their assets in the form of digital assets in approximately two months, with the remaining balance to be returned within the next 12 months.
“The preliminary settlement requires concrete documentation,” Gemini warned. “The required bankruptcy court proceedings may take up to two months to complete, and we will keep Earn users informed as needed.”
Gemini acknowledges the difficulties its customers have faced during the settlement process and is grateful for their patience and support. The company said: "As responsible stewards of the cryptocurrency ecosystem, we understand that our customers value the ability to hold their digital assets during the volatile cryptocurrency market cycles. The ability to return assets on a coin-for-coin basis is critical to us."
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