Investors in the Gemini exchange in New York are suing the company and its founders – Cameron and Tyler Winklevoss – for fraud.
Gemini Is Being Sued
It is alleged in a class-action lawsuit that the company is in violation of the Exchange Act. A complaint was filed against Gemini and its creators in the US Southern District of New York, and it centers around the firm’s Earn Program, which offers as much as 7.4 percent interest to traders who take part in it. The program halted all offerings in the month of December in 2022, meaning all investors that still had money within its confines suddenly couldn’t get ahold of their funds.
The Earn Program was allegedly shut down due to the company’s ties to the now fallen FTX exchange, which filed bankruptcy in late November following complaints of a liquidity crunch on social media. FTX is believed to have lent more than $10 billion in customer digital funds to Alameda Research, another company founded by FTX chief executive Sam Bankman-Fried.
The fall of FTX led to negative effects for Genesis Global, an institutional crypto firm and partner of Gemini. Two of the plaintiffs listed in the court filing – Max. J. Hastings and Brendan Picha – allege that Gemini did not register assets in the Earn Program as securities as they were required to do in accordance with present monetary laws in the U.S.
The complaint reads as follows:
When Genesis encountered financial distress [due to] a series of collapses in the crypto market in 2022, including FTX Trading Ltd. (‘FTX’), Genesis was unable to return the crypto assets it borrowed from Gemini Earn investors.
To say that Gemini has been having a rough time would be something of an understatement. Like many crypto companies, the enterprise has fallen victim to many of the bearish conditions that are now being witnessed daily within the borders of the digital currency space. So much so, that Gemini was forced to lay off approximately ten percent of its staff back in the summer of 2022.
The company took flak when it came to light that the firm was letting go of many of its employees via Zoom calls rather than delivering the news to them in person.
A Lot of Money Is Owed to the Firm
In addition, Gemini is also allegedly owed close to $1 billion by Genesis. The latter firm had approximately $2.8 billion in assorted loans, one of which stems from Genesis, though the company put out a message on Twitter last November that due to the frozen market and trouble with FTX, all redemptions on loans were being paused as of November 16, 2022.
At press time, it’s unclear when or even if the enterprise plans to begin its loan payment processes again.