Customers of Gemini Earn will be reimbursed fully for their investments, amounting to potentially over $1.1 billion, following the conclusion of the bankruptcy proceedings of Genesis Global Capital, previously associated with Gemini’s Earn program. Genesis declared bankruptcy in January 2023.
In a settlement reached with the New York Department of Financial Services (NYDFS), announced on a Wednesday afternoon, those who participated in the now-closed Gemini Earn program will be guaranteed 100% of their frozen funds, which could exceed $1.1 billion. As a condition of the settlement, Gemini will contribute $40 million towards Genesis’ bankruptcy process, which is still underway, and will pay a $37 million fine to NYDFS.
Furthermore, Gemini has pledged to ensure that $1.1 billion will be available for its Earn customers by the end of Genesis’ bankruptcy case. According to a press release, this commitment from Gemini aims to return 100% of the customers’ assets in their original form, contingent upon the approval of the bankruptcy court. In a statement, Gemini indicated its dedication to navigating the bankruptcy proceedings to secure a complete recovery of the digital currencies for Earn Customers, as confirmed by NYDFS.
Earn Update: Today, we are pleased to announce that we have finally reached a settlement in principle with Genesis and other creditors in the Genesis Bankruptcy that will, if approved by the Bankruptcy Court, result in all Earn users receiving 100% of their digital assets back in…
— GeminiTrustCo (@GeminiTrustCo) February 28, 2024
The Earn program was a service provided by Gemini that allowed its users to gain interest on their cryptocurrency holdings, with Genesis providing the essential backend operations. The regulatory authority accused Gemini of failing to adequately vet Genesis Global Capital, which was not regulated and was subsequently charged with fraud by the New York Attorney General’s office (though Genesis Global Trading, a separate branch of Genesis, did possess a NYDFS BitLicense, it was not involved in the Earn program).
Genesis declared bankruptcy in January 2023, listing Gemini among its top 50 creditors after it had halted customer withdrawals, impacting those using the Gemini Earn service. On a Wednesday, the NYDFS disclosed that Genesis had defaulted on approximately $1 billion in loans from Earn customers, adversely affecting around 200,000 clients.
Furthermore, the investigation by the Department uncovered that Gemini’s practices related to the Earn program, along with other actions, were risky and undermined the company’s financial stability. Specifically, Gemini Liquidity LLC, an unregulated subsidiary, amassed substantial fees from Gemini’s clients, fees that could have otherwise benefited Gemini, significantly impairing its financial health. The NYDFS has maintained the right to pursue legal action against Gemini if it fails to reimburse the $1.1 billion following the conclusion of Genesis’s bankruptcy proceedings.