Gemini agrees to return $1.1 billion to Earn customers as part of NYDFS settlement
The New York State Department of Financial Services (NYDFS) reached a settlement agreement with Winklevoss-owned crypto exchange Gemini.
The NYDFS announced the settlement in a press release published on Feb. 28. The regulator said that Gemini failed to protect its customers adequately and had multiple compliance issues.
Superintendent Adrienne Harris said:
“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.”
Settlement terms
The agreement mandates Gemini to return at least $1.1 billion to customers of its Earn Program following findings that the exchange failed to adequately oversee operations with Genesis, a third party implicated in the alleged fraud.
As part of the settlement, Gemini has also agreed to contribute $40 million towards the Genesis bankruptcy proceedings, which will benefit Earn Program customers directly.
Additionally, the exchange will pay a $37 million penalty to the NYDFS for several compliance failures, highlighting the regulatory body’s effort to enforce strict adherence to financial regulations within the crypto sector.
This settlement comes amid broader regulatory actions targeting crypto lending programs. However, it ends a long-running legal saga and ensures a favorable conclusion for customers.
Legal troubles
In January 2023, the SEC charged both Genesis and Gemini for the unregistered offer and sale of securities through the Gemini Earn program, which involved raising billions from investors without necessary registrations.
The two companies were also sued by the New York Attorney General’s Office over the Earn program and allegations of fraud. The lawsuit also included Genesis parent Digital Currency Group and its CEO Barry Silbert.
Genesis has since settled both the SEC and the NYAG lawsuits. It also recently paid an $8 million penalty and surrendered its BitLicense due to compliance failures identified by NYDFS, although these issues were not directly related to the Earn program.
Gemini has yet to announce any developments in the SEC and NYAG cases.
