Important Agreement Between Gemini and DFS Resolves Earn Program Predicament
Gemini Trust Company, LLC, a prominent figure in the digital asset exchange sector, has come to a significant understanding with the New York State Department of Financial Services (DFS). This groundbreaking agreement signifies a crucial step toward addressing the financial challenges encountered by customers of Gemini’s Earn Program, which saw tumultuous times due to alleged fraud and subsequent bankruptcy proceedings involving Genesis Global Capital, LLC (GGC).
The Genesis of the Issue
The core of the problem stems from the initiation of the Gemini Earn Program on February 1, 2021. This program allowed Gemini customers to lend their virtual currencies to GGC, a third-party without regulation, in exchange for interest payments. Unfortunately, the situation turned dire when GGC defaulted on approximately $1 billion worth of loans from Earn customers in November 2022, ultimately leading to a bankruptcy declaration two months later. Consequently, over 200,000 Earn customers, including almost 30,000 New Yorkers, found themselves stranded, unable to access their virtual currency holdings.
The Settlement Agreement
- Superintendent Adrienne A. Harris of DFS announced that Gemini has committed to returning at least $1.1 billion to affected Earn Program customers through the GGC bankruptcy proceedings.
- Gemini will contribute $40 million to the bankruptcy estate for the benefit of Earn customers.
- Gemini has also agreed to pay a $37 million penalty to DFS for multiple compliance failures that contributed to the situation.
This settlement agreement also includes provisions for additional actions by DFS in case Gemini fails to fulfill its obligation to return the specified amount to Earn customers post the resolution of the GGC bankruptcy, ensuring accountability as the bankruptcy process unfolds.
Gemini’s Response and Future Commitments
In a subsequent update shared on social media, Gemini expressed optimism regarding the settlement reached with Genesis and other creditors. The proposed settlement, subject to approval by the Bankruptcy Court, guarantees a “coin-for-coin” recovery for Earn users, indicating that customers will receive the exact digital assets they had lent, along with any appreciation in value since the program’s suspension. The estimated value of the assets to be returned surpasses $1.8 billion, showcasing a significant increase from the time withdrawals were halted.
Gemini has outlined a timeline for restitution, with Earn users expected to receive around 97% of their assets within approximately two months following court approval, while the remaining balance will be settled within the subsequent 12 months. This plan emphasizes Gemini’s dedication to making Earn customers whole, recognizing the crucial role played by DFS in facilitating this favorable outcome.
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