Gemini to Return $1.1 Billion to Customers Affected by Its Earn Program
Cryptocurrency exchange Gemini has committed to returning at least $1.1 billion to customers affected by the failure of its Gemini Earn lending program. The New York State Department of Financial Services (DFS) announced the settlement details.
Key Points:
- Gemini to contribute $40 million to Genesis bankruptcy for customer payouts.
- Also paying a $37 million fine for insufficient due diligence on the lending partner.
- Genesis Global Capital defaulted on $1B in loans from 200K+ to the Earn users.
- Settlement gives DFS the right to take action if full customer repayment is not met.
Gemini launched Earn in 2021, allowing users to loan their crypto holdings to Genesis Global Capital. However, Genesis ran into financial trouble in late 2022 and declared bankruptcy after defaulting on around $1 billion in outstanding loans.
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DFS says Gemini failed to monitor GGC
The DFS investigation found that Gemini failed to properly vet or monitor its lending partner. This led to significant losses for Earn customers when they found themselves unable to access their digital assets.
As part of the settlement announcement, the exchange is committing resources to work through the Genesis bankruptcy proceeding to make customers whole. Additionally, it will also pay a $37 million penalty for the lack of due diligence.
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DFS Superintendent Adrienne A. Harris said Gemini “failed to conduct due diligence on an unregulated third party, later accused of massive fraud, harming Earn customers.” The settlement secures a repayment commitment for those users, she said.
The regulator will have the right to take further action if Gemini does not succeed in fulfilling its obligation to reimburse all clients affected by the Genesis fallout.
