In an agreement with the New York Department of Financial Services (NYDFS), the Winklevoss-led cryptocurrency exchange Gemini has committed to returning over $1 billion to its customers. The settlement, which also includes a $37 million fine, comes as a significant development for the exchange amidst several ongoing legal challenges with big-name crypto firms and heightened regulatory scrutiny.
Gemini Agrees to Over $1 Billion Restoration in Settlement With New York Regulators
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Gemini Commits to $1 Billion Customer Payback in NYDFS Consent Order
Gemini’s recent settlement with the NYDFS marks a critical juncture for the exchange, following allegations of inadequate due diligence and misleading representations in its Earn program. Launched to offer customers up to 13% yield on lent cryptocurrencies, the program faced a dire setback as its sole counterparty, Genesis Global Capital, faltered amid the 2022 market downturn, freezing assets worth over $1.7 billion.
The consent order states:
The department found, notwithstanding Gemini’s public statements to the contrary, [Genesis Global Capital] was not fully vetted nor sufficiently monitored by Gemini; and in November 2022, [Genesis Global Capital] defaulted on approximately $940 million worth of loans made by Earn Customers.
NYDFS Superintendent Adrienne A. Harris underscored the gravity of Gemini’s oversight, stating, “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.”
Beyond the Earn debacle, the NYDFS investigation disclosed broader issues within Gemini, including engaging in practices that reportedly undermined its financial stability and exposed customers to undue risk. Notably, Gemini Liquidity, LLC, an unregulated affiliate of Gemini amassed substantial fees that weakened the exchange’s financial standing. The NYDFS consent order insists that Gemini’s statements about vetting Genesis were “misleading in several respects.”
The NYDFS announcement comes after Genesis Global Trading consented to an $8 million settlement fine and relinquished its New York state Bitlicense as a condition of the deal, due to compliance lapses. At that moment, the DFS superintendent expressed that Genesis had shown a “demonstrated a disregard for the Department’s regulatory requirements.”
What do you think about Gemini’s settlement with the NYDFS? Share your thoughts and opinions about this subject in the comments section below.
