In a recent development, cryptocurrency exchange Gemini has reached a settlement with New York regulators to return a minimum of $1.1 billion to customers who were affected by the collapse of its Gemini Earn Program. The settlement agreement also includes a $40 million contribution to help cover Genesis Global Capital’s bankruptcy proceedings and a $37 million fine imposed by the New York Department of Financial Services (NYDFS). This move comes after the program was launched in 2021, only to face significant challenges following the crash of FTX in 2022, which led to Genesis halting withdrawals and eventually filing for bankruptcy in January 2023.
Superintendent of the New York DFS, Adrienne Harris, highlighted Gemini’s lack of due diligence in selecting Genesis as its partner, which ultimately resulted in damaging financial consequences for over 200,000 Earn customers. Harris emphasized that Gemini’s failure to thoroughly investigate its partner’s financial stability played a significant role in the crisis that ensued, leaving customers unable to access their assets. The oversight was deemed costly, and the NYDFS made it clear that further action could be taken if Gemini failed to uphold its commitment to return the funds to affected users.
Gemini has assured customers that they will receive 100% of their digital assets back in kind as part of the settlement agreement, with approximately 97% of the assets expected to be returned within two months after approval by the bankruptcy court. The remaining balance will be distributed to customers over the course of the next 12 months. While this plan offers some relief to users who have been waiting to access their funds, the final timeline for the complete repayment remains dependent on the approval process and adherence to the agreed-upon terms.
Despite settling with the NYDFS, Gemini still faces legal action from the US Securities and Exchange Commission (SEC) and the New York Attorney General Letitia James. The Attorney General initially sued DCG, Genesis, and Gemini for an alleged $1 billion fraud related to Gemini Earn, but later revised the claim to $3 billion in light of additional reported losses by investors. These legal challenges continue to complicate Gemini’s position in the aftermath of the collapse of the Earn program, raising questions about the exchange’s oversight mechanisms and regulatory compliance moving forward.
The settlement deal reached between Gemini and New York regulators represents a significant step towards addressing the fallout from the Gemini Earn Program’s failure. By committing to return $1.1 billion to affected customers and engaging in bankruptcy proceedings to facilitate the repayment process, Gemini aims to restore trust and accountability in the cryptocurrency space. However, the exchange’s ongoing legal battles with the SEC and the New York Attorney General underscore the broader challenges facing the industry in ensuring transparency, due diligence, and consumer protection. As the regulatory landscape continues to evolve, exchanges like Gemini must prioritize compliance and risk management to avoid similar incidents in the future.
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