Gemini, a New York-based cryptocurrency exchange, has reached a settlement agreement to return US$1.1 billion in digital assets to users of its Earn program, following the bankruptcy of crypto lending company Genesis.
The settlement, announced on Feb. 28, is pending approval by the Bankruptcy Court and could see Earn users receive 100% of their digital assets back in kind, Gemini announced.
Gemini, founded by Cameron and Tyler Winklevoss, is also contributing US$40 million to aid in the recovery of user funds. The New York State Department of Financial Services (NYDFS) has fined Gemini US$37 million for compliance failures and has mandated the exchange to address these issues.
The settlement comes after the NYDFS accused Gemini of failing to conduct due diligence on Genesis, which was later implicated in alleged fraud, leading to Earn customers being unable to access their assets.
Superintendent Adrienne Harris emphasized the harm caused to customers and the need for Gemini to rectify the situation.
Gemini’s Earn program allowed customers to earn high interest rates by lending out their crypto assets. However, the program’s financial framework was facilitated by Genesis, which declared bankruptcy three months after the FTX collapse in November 2022, freezing assets of Earn customers.
The settlement aims to resolve the legal issues surrounding Gemini and Genesis, including lawsuits from the New York Attorney General’s Office and charges by the Securities and Exchange Commission (SEC) for the unregistered offer and sale of securities through the Earn program.