Following a deal with the New York Department of Financial Services (NYDFS), Gemini Trust, the cryptocurrency exchange founded by Cameron and Tyler Winklevoss, has committed to returning at least $1.1 billion to consumers of its now-defunct loan program. In addition, the exchange will have to pay a $37 million punishment for what the regulator called “significant failures” that put the stability of the business at risk.
Overseeing Gemini are the Winklevoss twins, who gained notoriety for their legal disputes with Mark Zuckerberg of Meta about the beginnings of Facebook. Gemini Earn customers will receive 100% of their digital assets back as part of the settlement, along with any appreciation, the business revealed in a blog post.
With Gemini Earn, users may lend cryptocurrency assets to Genesis Global Capital (GGC) and get interest payments of up to 8%, making it appear like a low-risk investment option. But in November 2022, GGC stopped accepting withdrawals, and Gemini promised to repay more than $1.8 billion—more than $700 million more than it had previously been worth.
November 2022 saw significant volatility in the cryptocurrency market due to the demise of FTX, a well-known exchange, and Sam Bankman-Fried, the platform’s co-founder, being found guilty of fraud. The maximum sentence that Bankman-Fried might receive is 110 years in jail. His sentencing is set for March 28.
Although some of Gemini’s concerns are addressed in the settlement with NYDFS, the exchange is still at the center of a different lawsuit that the attorney general of New York brought in October. Gemini, GGC, and Digital Currency Group are accused in the case of misleading investors and hiding losses totaling more than $1 billion.
Gemini will need to resolve these legal issues in order to rebuild its credibility and trust in the bitcoin world.