Gemini Trust Co. has agreed to return $1.1 billion to customers and pay a $37 million fine, in a settlement with the New York Department of Financial Services (NYDFS) over the Gemini Earn program.
NYDFS Announcement
On February 28, 2024, NYDFS Trustee Adrienne A. Harris announced the settlement, stating, "Today's settlement is a win for Earn customers, who retain rights to the assets they entrusted to Gemini."
The settlement outlines Gemini's promise to return at least $1.1 billion to Earn program customers through Genesis Global Capital, LLC's bankruptcy proceedings. Additionally, Gemini will contribute $40 million to the bankruptcy for the benefit of Earn customers.
Trustee Harris emphasized Gemini's failure to conduct due diligence on unregulated third parties, which led to allegations of massive fraud and harm to Earn program customers.
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Earn Program and its Problems
The Earn program, which launched on February 1, 2021, allows Gemini customers to lend their virtual currency to an unregulated third party, Genesis Global Capital (GGC). GGC defaulted on approximately $1 billion worth of loans in November 2022, causing reputational and financial damage to Gemini and affecting more than 200,000 Earn customers.
Gemini Responses and Updates
Gemini acknowledged the settlement in an Earn Update, stating, "We have finally reached an agreement in principle with Genesis and other creditors in the Genesis Bankruptcy that, if approved by the Bankruptcy Court, will result in all Earn users receiving 100% of their digital assets back in kind ."
In short, the settlement between Gemini Trust Co. and NYDFS are still awaiting final approval and the necessary Bankruptcy Court proceedings could take up to two months to complete.
However, Gemini expressed optimism that if approved by the Bankruptcy Court, the settlement would result in all Earn users receiving 100% of their digital assets back in kind.
As part of the settlement, Gemini committed to returning more than $1.8 billion in value at current prices, exceeding the amount when Genesis stops withdrawals in November 2022.
Earn users can expect to receive approximately 97% of their assets in kind within about two months, with the remaining balance to be delivered within the next 12 months.
The $1.1 billion settlement by Gemini is an important chapter in the Gemini Earn Program saga. The settlement was approved after addressing all compliance lapses, fraud allegations, and reputational damage, caused by Gemini during the program, and thereafter finally offers a path for Earn program customers to obtain their rightful compensation.
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