Gemini crypto exchange said Wednesday that following a settlement with New York Attorney General Letitia James, $2.18 billion will be returned to defrauded investors. The 29,000 investors lost money when Genesis Global Capital went bankrupt. Gemini said the fraud was not a crypto problem, but "old-fashioned financial fraud." File Photo by John Angelillo/UPI |
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May 29 (UPI) -- Gemini crypto exchange said Wednesday that following a settlement with the New York Attorney General's office, $2.18 billion will be returned to defrauded users of the company's Earn program.
"This represents an unprecedented recovery among crypto bankruptcies, as well as bankruptcies in general, and follows our previous announcement that we reached a settlement in principle with Genesis and other creditors in the Genesis Bankruptcy, which will result in all Earn users receiving 100% of their digital assets back in kind," Gemini said in a statement.
Attorney General Letitia James secured the settlement last week with the bankrupt Genesis Global Capital. The returned money goes to 29,000 investors in the Gemini Earn program who were falsely led to believe the investment was low risk.
According to Gemini, the settlement represents 97% of the digital assets owed to Earn users, $1 billion more than when Genesis halted withdrawals. Gemini said that represents a 232% recovery.
The company said users can expect to get their "remaining asset balance" within the next 12 months.
"It's important to note that the Genesis bankruptcy was not a crypto problem. It was old-fashioned financial fraud compounded by a lack of regulatory clarity. To that end, we will continue to fight for clear rules and guidance for our industry that foster both innovation and consumer protection. And we will win this fight. The future is bright," Gemini said.
The Earn program was started in 2021, claiming customer investors could get high returns on bitcoin.
Gemini used the money invested to lend crypto to institutional borrowers. That was done through Genesis Global Capital.
The Genesis bankruptcy forced Gemini to stop withdrawals from the Earn program.
James then acted to help make defrauded investors whole.
The attorney general lawsuit found internal financials were risky and asserted that Gemini knew that the Genesis loans were unsecured "and at one point highly concentrated with one entity, Sam Bankman-Fried's Alameda, but did not reveal this information to investors."
