New York State Department of Financial Services (DFS) Superintendent Adrienne A. Harris announced that Gemini Trust Company, LLC has committed to return at least $1.1 billion to Gemini Earn Program customers through the Genesis Global Capital, LLC bankruptcy proceeding.
In furtherance of that commitment, Gemini will now “contribute $40 million to the GGC bankruptcy for the benefit of Earn customers in coordination with the Bankruptcy Court.”
Gemini will also pay “a $37 million fine to DFS for significant failures that threatened the safety and soundness of the company.”
As part of the settlement, the Department has “the right to bring further action against Gemini if the company does not fulfill its obligation to return at least $1.1 billion to Earn customers after the resolution of the GGC bankruptcy.”
Gemini commits to working through the bankruptcy process “to ensure that Earn Customers make a full recovery of their virtual currency.”
Superintendent Harris stated:
“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. Today’s settlement is a win for Earn customers, who have a right to the assets they entrusted to Gemini.”
Launched on February 1, 2021, Earn allowed Gemini customers “to loan their virtual currency to GGC, an unregulated third party that was not licensed by the Department.”
GGC then loaned those same assets “to its own counterparties. In return, Earn customers received interest payments. Despite Gemini’s public statements to the contrary, Gemini did not fully vet or sufficiently monitor GGC throughout the life of Earn and, in November 2022, GGC defaulted on approximately $1 billion worth of loans made by Earn customers.”
Two months later, GGC declared bankruptcy.
Gemini’s failure to conduct sufficient and ongoing due diligence “on GGC, as well as its failure to maintain adequate reserves throughout the life of Earn, caused significant reputational and monetary harm to Gemini itself and, to date, over 200,000 Earn customers, including almost 30,000 New Yorkers, remain unable to access their virtual currency.”
In addition to Gemini’s failures related “to Earn, the Department’s investigation revealed that Gemini engaged in unsafe and unsound practices that ultimately threatened the financial health of the company. Gemini Liquidity, LLC, an unregulated affiliate, collected hundreds of millions of dollars in fees from Gemini customers that otherwise could have gone to Gemini, substantially weakening Gemini’s financial condition.”
The Department’s investigation “further identified various management and compliance deficiencies.”
Gemini was chartered as “a limited purpose trust company and authorized to engage in virtual currency business by the Department in 2015. GGC, Gemini’s third-party borrower for Earn, was not licensed or regulated by the Department. Genesis Global Trading, Inc. (“GGT”) was the only Genesis entity licensed by DFS and was not involved in Earn. In January 2024, in connection with a settlement with DFS, GGT surrendered its BitLicense to the Department and has ceased operations.”
In a separate announcement, Gemini noted that they shared with Earn users that they 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.”
This means, for example, that if you had “lent one bitcoin in the Earn program, you will receive one bitcoin back.”
And it means that you will “receive any and all appreciation of your assets since you lent them into the Earn program. If approved, Gemini will be returning over $1.8 billion in value (at today’s prices) — $700 million more than when Genesis halted withdrawals on November 16, 2022.”
Looking forward, if the Bankruptcy Court approves “the settlement in principle announced today,”
Earn users can expect to “receive approximately 97% of their assets in kind within about two months. And they can expect to receive their remaining asset balance within the next 12 months.”
The settlement, in principle, is subject to definitive documentation.
The required Bankruptcy Court process “could take as long as two months to complete, and we will keep Earn users informed along the way.”
Gemini thanks the New York Department of Financial Services (DFS) for its role in this settlement, which “delivers a coin-for-coin recovery for Earn users.”
They’ve worked tirelessly over the past 15 months “to advocate for Earn users and seek the return of their assets. As a part of this settlement, Gemini is contributing $40 million to Earn users’ recovery.”
As stewards of the crypto ecosystem, Gemini say that they “know that their customers value the ability to hold their digital assets through the ups and downs of crypto market cycles. Being able to return assets on a coin-for-coin basis to their customers was critical for them.”
They claim to recognize the hardship “presented by this lengthy process, and they are deeply appreciative of their customers’ patience and support along the way.”
