Gemini, the cryptocurrency startup owned by the Winklevoss twins, has agreed to return $1.1 billion to customers who suffered losses in their partnership with the now-bankrupt crypto lender Genesis.
As part of a deal with the New York State Department of Financial Services (DFS), Gemini committed to reimbursing the funds lost by customers of its Earn program. This program allowed users to lend their cryptocurrencies to Genesis in exchange for interest payments.
The DFS stated that Gemini “did not fully vet or sufficiently monitor [Genesis] throughout the life of Earn.” Genesis defaulted on its loans and subsequently declared bankruptcy, leaving approximately 200,000 Earn customers without access to their assets.
According to DFS Superintendent Adrienne A.Harris, Gemini’s failure to conduct due diligence on the unregulated third party resulted in significant harm to Earn customers. The sudden inability to access their assets following Genesis Global Capital’s financial meltdown underscored the importance of customer protection in the cryptocurrency industry.
Gemini expressed its satisfaction with the settlement in a tweet, stating that they had reached an agreement in principle with Genesis and other creditors. Pending approval by the Bankruptcy Court, this settlement will ensure that all Earn users receive 100% of their digital assets back in kind.
In addition to reimbursing customers and paying fines, Gemini has agreed to contribute $40 million to the Genesis bankruptcy estate for the benefit of Earn program participants. Moreover, the company will pay a hefty $37 million fine for what the DFS described as “significant failures” that posed risks to its financial stability and operational integrity.
Both Genesis and Gemini faced charges from the Securities and Exchange Commission (SEC) last year regarding the unregistered offer and sale of securities. Genesis settled its portion of the lawsuit by paying $21 million earlier this month.
While the settlement addresses the financial and regulatory implications of the Gemini-Genesis partnership, it remains unclear how these developments will impact the Winklevoss twins’ ventures, including their cover band, Mars Junction.