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Winklevoss’ Gemini to Refund $1.1 Billion After NYDFS Findings

Enforcement News | Feb 29, 2024

Image from Gemini blog - Winklevoss' Gemini to Refund $1.1 Billion After NYDFS Findings

Image from Gemini blog

Gemini agrees to a $1.1 billion refund plan after NYDFS findings

The New York State Department of Financial Services (NYDFS) has announced an agreement with Gemini Trust Company, LLC, mandating the return of at least $1.1 billion to customers of its Earn program. This decision follows the discovery of compliance failures and the mishandling of a partnership with Genesis Global Capital, LLC (GGC), which led to substantial customer losses. The settlement includes a $37 million fine and outlines Gemini's commitment to rectify the situation through the bankruptcy proceedings of GGC.

  • Gemini's pledge to reimburse $1.1 billion to Earn customers represents a substantial effort to address the fallout from the Earn program's suspension and Genesis Global Capital's subsequent bankruptcy.

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  • This settlement highlights a shift towards stronger protections for cryptocurrency investors, particularly in response to the risks associated with lending programs and third-party partnerships.  The NYDFS has imposed a $37 million penalty on Gemini for various compliance failures, emphasizing the importance of regulatory adherence in the cryptocurrency sector.
  • Gemini's operational practices, including insufficient due diligence and inadequate reserve maintenance, have led to significant reputational and financial damage, affecting over 200,000 customers.

Gemini's Response to the Resolution

In a blog post from Team Gemini said, "This settlement, pending Bankruptcy Court approval, promises the return of 100% of digital assets to Earn users, including any appreciation since the assets were lent. Gemini expects to return over $1.8 billion in today's value, with users receiving approximately 97% of their assets in kind within about two months and the remainder within the next 12 months.

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Gemini also acknowledges the New York Department of Financial Services' role in reaching this settlement and commits an additional $40 million to aid users' recovery, emphasizing their dedication to customer asset security and appreciation for users' patience throughout the process."

Outlook

The NYDFS's action against Gemini Trust Company, LLC, culminating in a $1.1 billion customer reimbursement plan is another cautious warning to other platforms regarding the importance of compliance, due diligence, and the protection of consumer assets. This development is expected to influence future regulatory frameworks and operational standards within the digital asset market, aiming to foster a safer and more reliable trading environment for investors.

NCFA Jan 2018 resize - Winklevoss' Gemini to Refund $1.1 Billion After NYDFS FindingsThe National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, artificial intelligence, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org

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