Winklevoss-led Gemini to return over $1 billion to customers with a $37 million fine in agreement with NY regulator.

New York’s Department of Financial Services (NYDFS) announced a settlement with Gemini Trust Company, the cryptocurrency exchange founded by Cameron and Tyler Winklevoss, over its high-yield lending product Gemini Earn. Under a February 2024 consent order, Gemini must return more than $1 billion to Earn customers whose assets have been frozen since late 2022 and pay a $37 million civil penalty for what NYDFS described as “significant failures” in risk management and oversight. The regulator concluded that Gemini failed to conduct adequate due diligence on its sole Earn counterparty, Genesis Global Capital, and made misleading representations about the program’s risks and the firm’s oversight. NYDFS nonetheless stopped short of revoking Gemini’s New York trust charter. Gemini Earn, launched during the last crypto bull market, allowed customers to lend crypto for yields of up to 13%, with all loans funneled through Genesis, part of Barry Silbert’s Digital Currency Group. Genesis in turn lent to firms including Three Arrows Capital and Alameda Research; after cascading failures and the FTX collapse, Genesis halted withdrawals in November 2022 and later filed for bankruptcy, leaving more than 200,000 Earn users unable to access about $1.7 billion in assets. NYDFS found Gemini lacked sufficient insight into Genesis’s growing risk exposure, failed to maintain appropriate reserves, and continued onboarding new Earn customers and extending loans even after deciding internally to wind down the product in 2022. Separately from the NYDFS action, Gemini faces ongoing lawsuits from the U.S. Securities and Exchange Commission and the New York Attorney General over Earn, while Genesis has settled with the SEC. The settlement is significant for both customer recovery and regulatory precedent. NYDFS is requiring Gemini to restore all Earn customer funds as a condition of retaining its license, making the refund obligation effectively enforceable by the regulator. Gemini has also said there is a settlement “in principle” in the Genesis bankruptcy that, if approved by the court, would see Earn users receive 100% of their digital assets back in kind, potentially totaling about $1.8 billion at then-current prices—roughly $700 million more in value than when Genesis froze withdrawals. The case underscores how interconnected lending arrangements between centralized crypto platforms and institutional borrowers amplified losses in the 2022–2023 crypto credit crisis, and it illustrates a more aggressive stance by New York regulators in policing consumer protection and risk controls in the digital asset sector.

✨ AI-generated background, compiled from web sources — not editorial content.

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