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The cryptocurrency exchange based in New York, Gemini, made an announcement late Wednesday that an agreement has been reached in the bankruptcy case of Genesis, a crypto lending company. This agreement will see the return of $1.1 billion in digital assets to the users of the Earn program on the platform.
Earn Update: Today, we are pleased to announce that we have finally reached a settlement in principle with Genesis and other creditors in the Genesis Bankruptcy that will, if approved by the Bankruptcy Court, result in all Earn users receiving 100% of their digital assets back in…
— GeminiTrustCo (@GeminiTrustCo) February 28, 2024
Gemini stated stated that a settlement has been finally reached with Genesis and other creditors in the Genesis Bankruptcy which would ensure that all Earn users get back 100% of their digital assets.
A settlement in principle has finally been reached with Genesis and other creditors in the Genesis Bankruptcy, which, pending approval by the Bankruptcy Court, will ensure that all Earn users get back 100% of their digital assets in kind.
What is Gemini?
Gemini, also known as the Gemini Trust Company, was founded in 2014 by Cameron and Tyler Winklevoss. It provides a variety of financial services in addition to being a cryptocurrency exchange. These services include cryptocurrency staking, crypto wallets, cold storage, credit card services, and the Nifty Gateway NFT marketplace.
According to their site, one of the key features of Gemini is its emphasis on security and compliance. The platform employs industry-leading security measures, such as cold storage for the majority of its digital assets, two-factor authentication, and encryption to protect user information. Additionally, Gemini’s status as a regulated entity means that it adheres to strict compliance standards, including anti-money laundering (AML) and know your customer (KYC) protocols.
Lawsuit against Gemini
Despite Gemini’s status as a regulated entity and its emphasis on compliance, in October 2023, the New York Attorney General’s office (NYAG) filed a lawsuit against Gemini, Genesis, a digital asset lender, and Digital Currency Group in the U.S. Bankruptcy Court Southern District of New York, accusing them of defrauding investors.
New York Attorney General Letitia James stated at the time, “These cryptocurrency companies lied to investors and attempted to conceal over a billion dollars in losses. Middle-class investors bore the brunt of this deceit.”
She added that hardworking New Yorkers and investors nationwide lost over a billion dollars because they were misled with blatant lies that their investments in Gemini Earn would be secure and profitable.
The cryptocurrency market experienced a contagion following the collapse of the FTX cryptocurrency exchange in 2022. One of the affected companies was Genesis Trading, which suspended its lending services in November 2022 and warned its customers of a potential bankruptcy.
Subsequently, Gemini sued Genesis for control over $1.6 billion in Grayscale Bitcoin Trust shares. Gemini has stated that participants in the Earn program will receive the same amount of Bitcoin they originally lent, along with any increase in value since then. Gemini noted, “If approved, we will be returning over $1.8 billion in value (at today’s prices), which is $700 million more than when Genesis halted withdrawals on November 16, 2022.”
The required Bankruptcy Court process could take up to two months to complete
As part of the settlement, Gemini announced that the exchange would contribute $40 million towards the recovery of user funds. Once approved, Earn users can expect to receive around 97% of their assets in kind within approximately two months, with the remaining balance to be returned within the following 12 months.
Gemini cautioned, “The settlement in principle is subject to definitive documentation. The required Bankruptcy Court process could take up to two months to complete, and we will keep Earn users informed throughout.”
Acknowledging the difficulties customers have faced during the settlement process, Gemini expressed gratitude for their patience and support. The company stated, “As responsible stewards of the crypto ecosystem, we understand that our customers value the ability to hold their digital assets through the fluctuations of crypto market cycles. It was crucial for us to be able to return assets to our customers on a coin-for-coin basis.”
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