Crypto exchange Gemini, owned by the Winklevoss twins,
has announced the return of $2.2 billion to users of its Earn program after
halting withdrawals 18 months ago, CNBC reported. This move followed a
substantial settlement between the New York Attorney General and Genesis,
Gemini’s lending partner.
Refunding Crypto Lending Users
With the more than $2 billion settlement, investors
are expected to fully reclaim their losses, marking a significant victory for
those affected. The resolution between Gemini and Genesis was brokered
with the oversight of the New York Attorney General.
Gemini‘s Earn
program was launched in 2021 to offer users the opportunity to earn attractive
yields on their cryptocurrency holdings. By participating in the program, users
entrusted their assets to Gemini, which then facilitated lending to
institutional borrowers through Genesis Global Capital.
However, the program faced challenges in November 2022
when Genesis halted new loan originations and redemptions, prompting Gemini to
suspend withdrawals. However, Gemini committed to returning 100% of digital assets to Earn program users. The company’s approach, coupled with regulatory intervention,
has paved the way for a substantial recovery for affected investors.
Gemini reportedly emailed users that the initial Earn
distributions, approximately 97% of the funds Genesis owed users, were available in
Gemini accounts. The crypto exchange said that the distribution followed a
settlement with Genesis and other creditors, which will result in Earn users
receiving full reimbursement. At $2.18 billion, the distribution represents a 232% recovery for users.
NYAG Lawsuit
Last year, New York Attorney General Letitia James sued Gemini, Genesis, and Digital Currency Group for allegedly
orchestrating a fraudulent scheme that misled over 230,000 investors and
resulted in losses exceeding $1 billion.
The lawsuit claimed that Gemini misled investors about
the safety of its partnership with Genesis while Genesis and DCG concealed
significant losses. Investors were told that their money would be safe and grow
through the Gemini Earn program, which promised to generate profits by lending
assets to third parties. However, an investigation by the Attorney General revealed
a different reality.
The losses resulted from defaults by major borrowers
such as Three Arrows Capital and Babel Finance, resulting in a combined loss exceeding $1.2 billion. Despite
these significant financial setbacks, Genesis and DCG reportedly misled
investors by falsely claiming that the losses had been absorbed through a
promissory note.
This article was written by Jared Kirui at www.financemagnates.com.
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