Crypto exchange Gemini has settled with the New York Department of Financial Services (NYDFS) to reimburse approximately $1.1 billion to its Gemini Earn customers. The customers could not withdraw their funds around the same time that crypto exchange FTX collapsed.
The NYDFS has clarified that it will pursue additional measures against the exchange if it fails to meet its commitments.
Gemini To Repay Gemini Earn Customers
Gemini customers enrolled in the Gemini Earn program to earn increased interest rates by locking up their crypto assets. However, the now-defunct crypto lending platform Genesis facilitated the financial framework behind this program.
Just three months following the collapse of FTX in November 2022, Genesis declared bankruptcy, freezing assets belonging to Gemini Earn customers.
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In a statement on February 28, Superintendent Harris of the NYDFS clarified that Gemini neglected to conduct thorough due diligence on Genesis, before their partnership for the Genesis Earn Program. Gemini attributed the collapse to Genesis.
“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.”
Furthermore, Gemini faces a $37 million fine from the NYDFS for “significant failures that threatened the safety and soundness of the company.”
Uncertainty Grips Gemini Earn Customers
Since users were unable to withdraw funds and hearing the news that Genesis has filed for bankruptcy there has been much speculation over if they will see their assets again, and if so, how much will be received.
In December 2023, BeInCrypto reported that Gemini Earn users could be getting potentially just 61% of the value of their crypto from January 19, 2023. This is the date that Gemini filed for bankruptcy.
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Meanwhile, there was reportedly confusion over the protection of assets for Gemini Earn customers, with a portion of them believing it was protected under the FDIC.
In January 2023, BeInCrypto reported that several Gemini customers said that the exchange failed to distinguish the FDIC status of its own bank deposits of stablecoins and Gemini’s customer products.
This is a developing story.
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