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  • K Kim and S Pettigrove

Earn-out: Gemini to repay customers settling Earn claims


The New York Department of Financial Services (DFS) confirmed on Wednesday that the American cryptocurrency exchange Gemini committed to:

Return at least $1.1 billion to Gemini Earn Program customers;
Contribute $40 million to the Genesis Global Capital (GGC) bankruptcy for the benefit of Earn customers;

and

Pay a $37 million fine to the DFS.

The ‘Earn Program’ in question was launched in early 2021, offering retail investors up to 8% interest yield by lending their crypto assets to Gemini, which on-lent the assets to GGC, a subsidiary of Digital Currency Group (DCG), once a leader industry player before the failure of GGC, Genesis, and the sale of Coindesk.


In November 2022, GGC paused withdrawals and defaulted on nearly $1B worth of customer assets, after confirming that it had $175M in exposure to the FTX collapse. The Earn program was terminated in January 2023, with GGC filing for bankruptcy around the same time. This impacted 340,000 Earn customers, sparking litigation between GGC, DCG and Gemini.


Separately, GGC has settled allegations by the US Securities and Exchange Commission (SEC) over its involvement in the program, and has proposed a liquidation plan under which they will repay customers either in cash or cryptocurrency.


Superintendent Harris commented on the Gemini settlement:

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.

Gemini announced the recent developments on X, promising to keep users 'informed along the way':



Gemini customers are now one step closer to recovering their funds from the failed Earn product. The settlement follows a recent string of positive news for creditors of bankrupt crypto titans, including Celsius and FTX, which raised an additional $32.7M this week through its sale of FTX Europe to the firm's original founders.

By Kelly Kim and Steven Pettigrove

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