CNN
—
Gemini Trust, the cryptocurrency exchange founded by Cameron and Tyler Winklevoss, will return at least $1.1 billion to customers of a now-shuttered lending program following a settlement with New York regulators.
The New York State Department of Financial Services (NYDFS) said in a statement on Wednesday that Gemini will pay a $37 million penalty to regulators for “serious negligence that threatened the safety and soundness of the company.”
In a statement, the NYDFS said it reserves the right to “take further action against Gemini if the company fails to meet its obligations.”
Gemini is run by the Winklevoss twins and is best known for fighting a years-long lawsuit against META's Mark Zuckerberg, who accused Facebook of stealing his idea, eventually receiving a $65 million settlement.
The cryptocurrency exchange said in a blog post on Wednesday that as a result of the settlement, customers of its lending program, Gemini Earn, will receive 100% of their digital assets in kind, plus any appreciation in value.
Gemini Earn was promoted as a low-risk investment that allowed customers to lend their crypto assets to another firm, Genesis Global Capital (GGC), and earn up to 8% interest.
According to a Gemini blog post, “more than $1.8 billion in value (at today's prices) will be returned,” which is $700 million more than when GGC stopped withdrawals in November 2022.
That's when the trillion-dollar crypto market collapsed with the collapse of the once-booming crypto exchange FTX, whose co-founder Sam Bankman Freed was convicted in November on seven counts of fraud and conspiracy for his role in the company's downfall.
On Tuesday, Bankman Freed's lawyers filed a memorandum in Manhattan federal court seeking a sentence of five to six and a half years. Under federal guidelines, she could face up to 110 years in prison. She is scheduled to be sentenced March 28.
Wednesday's settlement doesn't mean Gemini's legal troubles are over. The company still faces a separate lawsuit filed in October by the New York Attorney General, which alleges that Gemini, GCC and GCC's parent company, Digital Currency Group, lied to investors and concealed more than $1 billion in losses.
