- Investors sued Gemini and the Winklevoss twins for allegedly selling unregistered interest-bearing accounts.
- The fall of FTX is the source of the disagreement between investors, Gemini, and its founders.
- After FTX collapsed, Gemini stopped withdrawals on Trust Earn accounts due to the exposure of Genesis Global to FTX.
- Gemini failed to honor further redemption requests, according to the lawsuit.
- As per reports, Gemini is currently working on a restructuring plan to ensure investors can access their funds.
Investors have sued Gemini Trust Co. and its founders, Tyler and Cameron Winklevoss, in a Manhattan federal court on Tuesday. As per a recent report by Bloomberg, investors sued the Winklevoss twins for allegedly selling unregistered interest-bearing accounts without registering them as securities.
The report indicated that in the lawsuit, investors alleged that the firm and the Winklevoss twins violated the stipulations of the Exchange Act and accused the twins and their cryptocurrency exchange of fraud.
However, the recent collapse of FTX is the source of the disagreement between investors, the Winklevoss twins, and Gemini. Earlier, the cryptocurrency exchange offered investors the ability to earn 8% interest on their investments through its Gemini Trust Earn product.
Following the collapse of FTX, Gemini halted withdrawal on Trust Earn accounts due to the exposure of its key partner, Genesis Global, to FTX. Since then, investors’ funds have been stuck in their Gemini Trust Earn accounts, and they cannot access them.
As part of the lawsuit, investors claimed Gemini did not meet further redemption requests. They complained that the crypto exchange wiped out all investors who still had funds on the Earn platform. Moreover, the investors claimed that registration would have enabled them to assess the risks better.
Efforts to Reclaim Investors’ Funds
The collapse of FTX cost Genesis Global a significant amount of assets. Genesis Global has an unfulfilled debt of $900 million to Gemini exchange. As a result, the crypto exchange set up a creditors committee to recover the funds from Genesis Global.
The cryptocurrency exchange is working on a restructuring plan to ensure investors can access their funds. In a message on its website before the Christmas holiday, Gemini said it’s urgently working to address every lapse.
Part of the cryptocurrency exchange’s efforts to restore normalcy to its Earn initiative saw the hiring of the Kirkland and Ellis Law Firm.
On the Flipside
- 2022 was a challenging year for Gemini. Early this year, Gemini also came under the scrutiny of the US Securities and Exchange Commission. Bloomberg reported then that the SEC is looking into the business activities of Gemini, raising the alarm over the high-yield crypto lending products offered by the firm.
- Although Gemini is facing some difficulties, it is still on a global expansion spree. At the end of last November, it began operating in Italy and Greece. Further, with a VASP registration in October, Gemini began operating in Ireland.
Why You Should Care
According to reports, Gemini froze $700 million in customer funds when it halted withdrawals from its Earn product. Investors appear dissatisfied despite the firm’s earlier claims that it is working to return funds to users.
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