Gemini Returns $2.2B to Crypto Lending Program Users Following 18-Month Suspension: Report

Crypto exchange Gemini, owned by the Winklevoss twins, has announced the return of $2.2 billion to users of its Earn program after halting withdrawals 18 months ago, CNBC reported. This move followed a substantial settlement between the New York Attorney General and Genesis, Gemini's lending partner.

Refunding Crypto Lending Users

With the more than $2 billion settlement, investors are expected to fully reclaim their losses, marking a significant victory for those affected. The resolution between Gemini and Genesis was brokered with the oversight of the New York Attorney General.

Gemini's Earn program was launched in 2021 to offer users the opportunity to earn attractive yields on their cryptocurrency holdings. By participating in the program, users entrusted their assets to Gemini, which then facilitated lending to institutional borrowers through Genesis Global Capital.

However, the program faced challenges in November 2022 when Genesis halted new loan originations and redemptions, prompting Gemini to suspend withdrawals. However, Gemini committed to returning 100% of digital assets to Earn program users. The company's approach, coupled with regulatory intervention, has paved the way for a substantial recovery for affected investors.

Gemini reportedly emailed users that the initial Earn distributions, approximately 97% of the funds Genesis owed users, were available in Gemini accounts. The crypto exchange said that the distribution followed a settlement with Genesis and other creditors, which will result in Earn users receiving full reimbursement. At $2.18 billion, the distribution represents a 232% recovery for users.

NYAG Lawsuit

Last year, New York Attorney General Letitia James sued Gemini, Genesis, and Digital Currency Group for allegedly orchestrating a fraudulent scheme that misled over 230,000 investors and resulted in losses exceeding $1 billion.

The lawsuit claimed that Gemini misled investors about the safety of its partnership with Genesis while Genesis and DCG concealed significant losses. Investors were told that their money would be safe and grow through the Gemini Earn program, which promised to generate profits by lending assets to third parties. However, an investigation by the Attorney General revealed a different reality.

The losses resulted from defaults by major borrowers such as Three Arrows Capital and Babel Finance, resulting in a combined loss exceeding $1.2 billion. Despite these significant financial setbacks, Genesis and DCG reportedly misled investors by falsely claiming that the losses had been absorbed through a promissory note.