Gemini to return $1.8bn of crypto lost in Genesis collapse in ‘win for customers’

Gemini said it plans to fully return customer funds to users of its Earn programme who were affected by the collapse of lender Genesis Global Capital.

If approved by the US Bankruptcy Court, Gemini said it will return $1.8 billion worth of cryptocurrencies, the exchange said in a statement on Wednesday.

That’s $700 million more than the original value of $1.1 billion intended to be refunded when Genesis halted withdrawals 16 months ago. The price of the cryptocurrencies have appreciated since — Bitcoin is up 152% over the past year.

Earn was a cryptocurrency lending service offered by Gemini, the crypto exchange founded by Cameron and Tyler Winklevoss.

Investors could deposit their digital assets, such as Bitcoin, to the exchange’s Earn programme, which would then lend them out to borrowers. Lenders would earn interest as high as 8% on those assets.

Genesis, a subsidiary of crypto mogul Barry Silbert’s Digital Currency Group, served as a partner for Gemini’s programme.

“Today’s settlement is a win for Earn customers, who have a right to the assets they entrusted to Gemini,” Adrienne Harris, superintendent of the New York Department of Financial Services, said in a separate statement on Wednesday.

“Gemini failed to conduct due diligence on an unregulated third party, later accused of massive fraud,” Harris said. That harmed Earn customers who were suddenly blocked from accessing assets after Genesis Global Capital’s “financial meltdown.”

It marks a potentially significant step in concluding long-standing negotiations between Gemini and Genesis to recover cryptocurrencies on behalf of the exchange’s 200,000 Earn customers.

Customers can expect to receive roughly 97% of their assets “in kind” before May, with the remainder to be doled out over the next 12 months, the exchange said.

”This means, for example, that if you had lent one Bitcoin in the Earn programme, you will receive one Bitcoin back,” Gemini wrote.

Gemini and Genesis did not immediately return a DL News request for comment.

Gemini will pay $40 million to Genesis’ bankruptcy proceedings “for the benefit of Earn customers” and a further $37 million to the NYDFS, the department said.

Earn came under fire and faced significant challenges when Genesis halted withdrawals on November 16, 2022, and filed for Chapter 11 bankruptcy protection about two months later.

Gemini was identified by Genesis as being one of roughly 50 major creditors.

The move was precipitated by a liquidity crisis, largely attributed to the broader collapse in the cryptocurrency market and industry failures, such as Celsius and later, FTX.

A halt on withdrawals left many Earn users unable to access their digital assets, leading to widespread concern and prompting intervention from regulatory bodies and negotiations for recovery solutions.

Sebastian Sinclair is a markets correspondent for DL News. Have a tip? Contact Seb at sebastian@dlnews.com.