Gemini Settles with NYDFS Committing to Return $1.1 Billion to Earn Program Customers

Gemini Trust Company, a prominent cryptocurrency exchange, has reached a settlement with the New York State Department of Financial Services (NYDFS) following compliance failures related to its Gemini Earn Program. As part of the agreement, Gemini has committed to returning at least $1.1 billion to customers affected by the program’s issues.

The settlement stems from Gemini’s failure to conduct due diligence on Genesis Global Capital (GGC), an unregulated third party involved in the Earn Program. GGC’s alleged fraud and subsequent financial meltdown left Earn customers unable to access their assets, prompting NYDFS Superintendent Adrienne A. Harris to take action.

Gemini will contribute $40 million to the Genesis bankruptcy proceeding, aiming to benefit Earn customers directly. Additionally, the company will pay a $37 million penalty to NYDFS for multiple compliance failures that jeopardized its safety and soundness.

The Earn Program, launched in February 2021, allowed Gemini customers to loan their virtual currency to GGC, which then loaned those assets to its own counterparties. However, GGC defaulted on approximately $1 billion worth of loans, leading to a significant loss for Earn customers.

Gemini’s lack of due diligence on GGC, coupled with its failure to monitor the third party adequately, resulted in harm to over 200,000 Earn customers. The investigation also revealed unsafe practices within Gemini, including an affiliate collecting excessive fees from customers, which weakened the company’s financial condition.

Gemini’s commitment to ensuring the full recovery of virtual currency for Earn customers through the bankruptcy process is a crucial step in addressing the fallout from the Earn Program debacle. Failure to fulfill this commitment could lead to further regulatory action by NYDFS.