Gemini, the crypto startup owned by the Winklevoss twins, will have to return $1.1 billion to customers who lost money in their partnership with the now-bankrupt crypto lender Genesis.
In a deal with the New York State Department of Financial Services, Gemini agreed to return the funds lost by customers of its Earn program, in which users could loan their crypto to Genesis in exchange for interest payments.
According to the Department of Financial Services, Gemini “did not fully vet or sufficiently monitor [Genesis] throughout the life of Earn,” and the company defaulted on its loans and then went bankrupt, leaving some 200,000 Earn customers empty-handed.
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“Gemini failed to conduct due diligence on an unregulated third party, later accused of massive fraud, harming Earn customers who were suddenly unable to access their assets after Genesis Global Capital experienced a financial meltdown,” DFS Superintendent Adrienne A.Harris said in a statement. “Today’s settlement is a win for Earn customers, who have a right to the assets they entrusted to Gemini.”
In a tweet, Gemini said it was “pleased to announce that we have finally reached a settlement in principle with Genesis and other creditors in the Genesis Bankruptcy that will, if approved by the Bankruptcy Court, result in all Earn users receiving 100% of their digital assets back in kind.”
The DFS said Gemini would also pay $40 million to the Genesis bankruptcy for the benefit of Earn customers, as well as a $37 million fine for “significant failures that threatened the safety and soundness of the company.”
Both Genesis and Gemini were also charged by the Securities and Exchange Commission last year with the unregistered offer and sale of securities; Genesis settled its half of the suit for $21 million earlier this month.
No word on how all of this will affect the Winklevosses’ cover band, Mars Junction.
