Following an agreement with the New York State Department of Financial Services (NYDFS), cryptocurrency exchange Gemini returned more than $1 billion to Earn Program customers on Wednesday.
The Winklevoss twins’ 2014 startup, Gemini Trust Company, announced a preliminary settlement with Genesis and other creditors involved in the bankruptcy case on February 28.
As a consequence of the settlement, participants in the Earn Program would “get 100% of their digital assets back in kind.” Users may anticipate receiving their assets on a 1:1 basis, if the Bankruptcy Court approves, according to the announcement:
“You will get back one bitcoin for every bitcoin you loaned via the Earn program. Additionally, because you loaned your assets to the Earn program, you will gain full ownership of any appreciation.”
The cryptocurrency exchange claims it will be returning assets worth more than $1.8 billion, based on today’s pricing. Almost two years ago, Genesis stopped withdrawing funds; thus, this is $700 million more than what the assets were worth.
After two months, consumers should get 97% of their assets in the event the settlement goes through. The remaining 3% should be anticipated within a year after the approval.
Gemini emphasized that it may take as much as two months to complete the necessary Bankruptcy Court procedure. It was also noted that final paperwork is required before the settlement can be finalized.
In partnership with Genesis Global Capital (GGC), Gemini launched the Earn Program. The partnership’s launch in February 2021 enabled consumers to receive interest payments as a passive income source.
The Earn program let consumers lend GGC their digital assets, which the business then leased to other companies, generating these interests.
Customers were concerned in November 2022 when Genesis requested to stop program withdrawals. It took two more months, in January of 2023, to permanently end the service.
The US Securities and Exchange Commission (SEC) subsequently filed accusations against the two businesses, claiming that they offered unregistered securities via the Earn program.
This month, GGC and the SEC settled their civil complaint, putting a stop to the legal action against the corporation. The $21 million civil penalty was part of the settlement, dependent upon the company’s ability to repay creditors and consumers.
Earn clients would profit from the crypto exchange’s $40 million contribution to the Genesis Global Capital bankruptcy, according to New York Department of Financial Services Superintendent Adrienne Harries’ announcement on Wednesday.
The New York Department of Financial Services (NYDFS) also levied a $37 million punishment on Gemini, citing the business’s “severe failings” in client security as the reason why it “compromised the safety of the company.” It is believed by the NYDFS that the corporation did not “keep enough reserves throughout the life of Earn” and did not do enough due diligence on GGC.
According to Superintendent Harries, the settlement is good news for Earn customers. After the exchange “failed to secure” its customers’ funds, those customers will get them back, according to Harries:
In the aftermath of Genesis Global Capital’s financial collapse, Earn clients found themselves unexpectedly unable to access their funds, and Gemini neglected to do due diligence on an unregulated third party, which led to subsequent claims of huge fraud.
As a final point, the NYDFS said that it would not hesitate to pursue further legal measures against Gemini in the event that the firm does not pay back the Earn program consumers the minimum amount of $1.1 billion as promised in the settlement.
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