$2 Billion Settlement for Gemini Earn Users

Quick Look

• Genesis seeks bankruptcy court approval for a settlement to compensate users affected by the Gemini Earn program’s closure.
• 100% reimbursement for suspended Earn users, with an initial 97% payout shortly after court approval.
• Around $2 billion in crypto, a significant increase from the service’s suspension value.

The Gemini Earn program, a collaborative venture between Genesis and Gemini, aimed at offering returns on cryptocurrency deposits. This situation has taken a significant turn with the announcement of a proposed settlement to compensate the affected users fully. On March 19, 2024, Gemini disclosed Genesis’ request to a bankruptcy court for the nod on a settlement principle. The principle aims to redistribute funds to users who suffered from the Earn program’s discontinuation. Furthermore, this comes ahead of a critical hearing set for April 16, 2024, which will deliberate the approval of this settlement.

Immediate 97% Payout Post-Court Approval

The closure of the Earn program sparked widespread concern among its users. That way, culminating in a proposed settlement that stands out for its commitment to reimbursing affected parties comprehensively. According to the settlement terms, users whose accounts were left in limbo can receive 100% of their assets back. Besides, they will get an immediate 97% reimbursement due a couple of weeks after the court’s approval. The remainder of the funds will emanate from Genesis’ parent company, Digital Currency Group. Therefore signifying a collective effort to resolve the fallout.

This proposed compensation, estimated at $2 billion in cryptocurrency at current prices, marks a $900 million uptick from the value at the time of the service’s suspension in 2022. Therefore, this substantial figure underscores the severity of the impact on users and the lengths the involved parties are willing to go to ensure a resolution.

Gemini’s $50M Boost to Expedite Refunds

Gemini’s involvement in this settlement is notable, with the platform pledging $50 million towards the restitution funds. This commitment reflects Gemini’s dedication to its users’ welfare. Besides, it also secures an expedited return of assets independent of Genesis’ bankruptcy proceedings. As articulated in their statement, Gemini’s stance emphasizes the settlement agreement as the optimal route to a swift recovery for its lenders, showcasing a firm resolve to navigate through the complexities of this financial debacle.

Legal Milestones: $21M SEC Penalty Settlement

The journey to this settlement was fraught with legal and regulatory challenges. In January 2023, Genesis filed for partial bankruptcy. This move coincided with the SEC levying charges against both Gemini and Genesis for the unregistered operation of the Gemini Earn program. The resolution of these challenges through a $21 million civil penalty agreement with the SEC, payable by Genesis post-bankruptcy claim satisfaction, marks a pivotal step towards rectifying the oversight and moving forward.

FTX Fallout Triggers $900M Asset Freeze

The partnership between Genesis and Gemini, heralded by the launch of the Gemini Earn program in February 2021, sought to innovate in the crypto deposit return space. However, the subsequent suspension of withdrawals in November 2022, catalyzed by the FTX collapse and a wider lending crisis, led to the program’s discontinuation. The fallout from FTX’s collapse, notably Genesis’ $175 million locked with FTX, precipitated a liquidity crunch. This directly impacted the Gemini Earn program, trapping $900 million in assets from 340,000 users.

Path to Recovery: Comprehensive User Reimbursement

The discourse around the settlement underscores the urgency and complexity of the situation. Especially considering Cameron Winklevoss’s accusations against Digital Currency Group for delaying the reimbursement process. The $21 million settlement with the SEC intervened with the Earn program’s unregistered security offering. This move highlights the legal ramifications and steps towards compliance and resolution.

The proposed settlement between Gemini and Genesis aims to compensate approximately 232,000 affected customers with about $2 billion in digital coins. This represents a significant effort to address the repercussions of the Earn program’s suspension. Furthermore, this endeavour seeks to restore trust among users and navigate the intricacies of legal and financial accountability in the evolving digital currency landscape.