Gemini to Pay $37 Million Fine and Return $1.1 Billion to Clients

The cryptocurrency exchange Gemini has committed to returning $1.1 billion to users of its Earn staking program as part of a settlement with the New York State Department of Financial Services.

NEW: Superintendent Adrienne A. Harris Secures Commitment from Gemini Trust Company, LLC to Return at Least $1.1 Billion to Earn Program Customers

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Under the settlement, the Winklevoss brothers’ company will also contribute $40 million towards the bankruptcy of Genesis Global Capital (GGC) and pay a $37 million fine for “serious compliance violations.”

To ensure the payments, Gemini has agreed to undergo bankruptcy proceedings. The department reserves the right to file additional claims if the exchange fails to meet its obligations.

Launched on February 1, 2021, the Earn program allowed Gemini clients to lend cryptocurrency to GGC. In return, users received interest income.

According to the regulator, the exchange failed to properly oversee its partner’s activities, despite assurances to the contrary. In December 2022, GGC defaulted on loans totaling approximately $1 billion. Two months later, the firm filed for insolvency.

“Gemini failed to conduct thorough due diligence on an unregulated third party later accused of fraud, causing harm to Earn clients who suddenly lost access to their assets after Genesis Global Capital experienced a financial crisis,” stated Superintendent Adrienne Harris.

The regulator reports that more than 200,000 individuals were affected, nearly 50,000 of whom are New York residents.

The department noted that its investigation uncovered “unsafe and unsound practices” by Gemini, which jeopardized the company’s financial position. The regulator also cited numerous deficiencies in the exchange’s management and regulatory compliance.

Gemini received a license from the department in 2015 to operate in the virtual assets sector as a trust company. The exchange’s partner, GGC, did not have a BitLicense. 

Another subsidiary of Digital Currency Group, not involved in Earn, held approval to operate in the state. In January 2024, Genesis Global Trading, as part of a settlement reached with the department, relinquished its BitLicense and ceased operations. 

Earlier in February, the New York Attorney General tripled the alleged fraud amount to over $3 billion in the case against Gemini, Genesis, and Digital Currency Group.