Feb 28, 2024 - Business

NYDFS settlement with Gemini could deliver $1.1 billion to Earn customers

NYDFS Adrienne Harris

Adrienne Harris, NYDFS superintendent, speaks during the DC FinTech Week. Photo: Ting Shen/Bloomberg via Getty Images

Cameron and Tyler Winklevoss's crypto exchange, Gemini, agreed to return at least $1.1 billion to its Earn customers through Genesis Global Capital's bankruptcy, or suffer more consequences.

Why it matters: New York's Department of Financial Services is trying to deliver justice to victims — over 200,000 Earn customers, including some 30,000 who live in the state.

Catch up quick: Customers of the Gemini Earn program — in which Genesis was a lending partner — saw withdrawals halted in Nov. 2022 and stuck in Genesis' longer-than-expected bankruptcy proceeding.

  • Customers had thought their money was as secure as a bank's savings account, reassured by mentions of FDIC insurance.

Between the lines: NYDFS head Adrienne Harris said the regulator had the right to bring further action against Gemini if it didn't fulfill its obligation to return at least $1.1 billion to those customers, following the resolution of the Genesis bankruptcy.

  • Gemini pledged to contribute $40 million to the bankruptcy proceeding and pay a $37 million fine to DFS.
  • NYDFS granted a charter to Gemini in 2015 to operate in the state.

The big picture: Harris's office is emerging as the crypto hammer in the state.

  • The department's agreement with Gemini runs into a separate settlement reached recently between Attorney General Letitia James and Genesis.
  • The settlement included an expansion of the original suit, tripling the original alleged fraud to more than $3 billion.
  • Digital Currency Group subsequently filed an objection with the bankruptcy court, pushing back on the expanded lawsuit as well as the settlement with its subsidiary, saying it wasn't a proper settlement under the bankruptcy code.

What we're watching: Which state regulator becomes the people's champion will depend on the bankruptcy court's decision.

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