Gemini’s Path to Restitution: A Settlement for Earn Program Customers

Gemini Trust Company, LLC, a key player in the digital asset exchange space, has reached a pivotal agreement with the New York State Department of Financial Services (DFS). This agreement marks a crucial step toward resolving the financial predicaments faced by customers of Gemini’s Earn Program, following a tumultuous period marked by alleged fraud and subsequent bankruptcy proceedings involving Genesis Global Capital, LLC (GGC).

The Genesis of the Issue

The crux of the matter dates back to the launch of the Gemini Earn Program on February 1, 2021. This program allowed Gemini customers to lend their virtual currencies to GGC, an unregulated third party, in exchange for interest payments. However, the arrangement took a dire turn when GGC defaulted on approximately $1 billion worth of loans from Earn customers in November 2022, leading to a bankruptcy declaration two months later. The fallout left over 200,000 Earn customers, including almost 30,000 New Yorkers, in limbo, unable to access their virtual currency assets.

The Settlement Agreement

Superintendent Adrienne A. Harris of DFS announced that Gemini has committed to returning at least $1.1 billion to affected Earn Program customers through the GGC bankruptcy proceedings. As part of this commitment, Gemini will contribute $40 million to the bankruptcy estate for the benefit of Earn customers. Additionally, Gemini has agreed to pay a $37 million penalty to DFS for multiple compliance failures that contributed to the situation.

This settlement also includes provisions for further action by DFS should Gemini fail to meet its obligation to return the stipulated amount to Earn customers post the resolution of the GGC bankruptcy. This ensures a layer of accountability as the bankruptcy process unfolds.

Gemini’s Response and Future Commitments

In a subsequent update shared on social media, Gemini expressed optimism about the settlement reached with Genesis and other creditors. The proposed settlement, pending approval by the Bankruptcy Court, promises a “coin-for-coin” recovery for Earn users. This means that customers are expected to receive the exact digital assets they lent, along with any appreciation in value since the program’s suspension. Gemini estimates the value of the assets to be returned at over $1.8 billion, marking a significant increase from the time withdrawals were halted.

Gemini outlined a timeline for restitution, indicating that Earn users could receive approximately 97% of their assets within about two months following court approval, with the remainder to be settled within the next 12 months. This plan underscores Gemini’s efforts to make Earn customers whole, acknowledging the role of DFS in facilitating this outcome.