Gemini to Return All Digital Assets to Earn Users After Settlement with Genesis

Gemini, one of the leading cryptocurrency exchanges in the world, has announced that it has reached a settlement in principle with Genesis, the lending platform that caused the disruption of its Earn program in 2022. The settlement, if approved by the Bankruptcy Court, will result in the full recovery of all digital assets for Earn users, with a total value of $1.8 billion.

Gemini Thanks DFS for Coin-for-Coin Recovery

In a blog post published on February 29, 2024, Gemini thanked the New York Department of Financial Services (DFS) for its role in facilitating the settlement, which delivers a coin-for-coin recovery for Earn users. This means that users will receive the same amount and type of digital assets that they had lent in the Earn program, regardless of the price fluctuations since the halting of withdrawals in November 2022.

Gemini stated that it has worked tirelessly over the past 15 months to advocate for Earn users and seek the return of their assets. The company also apologized for the inconvenience and frustration caused by the Earn program’s disruption and assured users that it has learned from this experience and implemented changes to prevent similar incidents in the future.

Gemini to Pay $37 Million Fine and Contribute $40 Million to Genesis Bankruptcy

As part of the settlement, Gemini will pay a $37 million fine to the DFS for major failures impacting the company’s stability and safety. According to the DFS, Gemini failed to conduct due diligence on Genesis, an unregulated third party that was later accused of massive fraud, harming Earn customers who were suddenly unable to access their assets after Genesis experienced a financial meltdown.

Superintendent Adrienne A. Harris said that the settlement is a win for Earn customers, who have a right to the assets they entrusted to Gemini. Harris also warned that the DFS will continue to hold accountable any entities that operate in the crypto space and violate the state’s laws and regulations.

Additionally, Gemini will contribute $40 million to the Genesis Global Capital bankruptcy, aiming to benefit Earn customers, in coordination with the Bankruptcy Court. This contribution will help expedite the distribution of assets to Earn users, with about 97% of the assets expected to be returned in kind within the next two months, and the remainder over the next 12 months.

Genesis and the Failed Earn Program

The Earn program was launched by Gemini on February 1, 2021, as a way for customers to lend their cryptocurrencies to Genesis and earn interest. However, Gemini failed to properly oversee Genesis, leading to a default on nearly $1 billion in loans by November 2022 and Genesis’s subsequent bankruptcy.

This lack of diligence and inadequate reserves by Gemini resulted in over 200,000 Earn customers being unable to access their assets, causing both reputational and financial damage to Gemini and its users. The Earn program was suspended indefinitely and Gemini faced multiple lawsuits and investigations from regulators and creditors.

The settlement with Genesis is a significant step towards resolving the Earn program’s disruption and restoring trust and confidence among Gemini’s customers and partners. Gemini said that it remains committed to providing a safe and secure platform for buying, selling, and earning digital assets.