Crypto exchange Gemini announced that the parties involved in the bankruptcy case of Genesis have agreed to return digital assets to the users of the Earn program of the platform.
The crypto lending company has agreed to pay $1.1 billion, as part of the settlement. The New York-based exchange said that 100% of the digital assets of Earn users would be returned.
The situation
Also known as Gemini Trust Company, the crypto exchange was founded by Tyler and Cameron Winklevoss in 2014 and other than the exchange, it also offers broader financial services.
These services include crypto staking and credit card services, along with cold wallets and cold storage options. It also operates the Nifty Gateway NFT marketplace.
A lawsuit had been filed by the office of the New York Attorney General (NYAG) back in October against Gemini, Digital Currency Group and digital asset lender Genesis for defrauding investors.
The case was filed in the US Bankruptcy Court Southern District of New York. Letitia James, the New York Attorney General, had said at the time that the crypto firms had lied to their investors.
She said that it was middle-class investors who had suffered due to these companies that had hidden their losses of more than a billion dollars.
The FTX fiasco
She said that hardworking people had suffered losses of over a billion dollars because they were told that their funds would remain safe in Gemini Earn and grow as well.
In 2022, the downfall of the FTX crypto exchange resulted in a contagion in the crypto market. Genesis trading was one of the companies that had also been caught in the blood bath.
The company suspended its lending services in November 2022 and also issued a warning to customers about a potential bankruptcy.
The following week saw Gemini file a lawsuit against Genesis for control of its shares in the Grayscale Bitcoin Trust worth $1.6 billion.
The settlement
As per Gemini, those who participated in the Earn program will get the same amount of Bitcoin they had lent originally and they will also get the increase in value that has been realized since then.
Gemini said that $1.8 billion would be returned in value at current prices, which is $700 more than when withdrawals were halted by Genesis on November 16th, 2022.
Gemini said that part of the settlement would also see it contribute $40 million to help recover funds of its users.
It said that if the settlement is approved, then Earn users would be able to get back at least 97% of their assets within two months and the remaining balance would be paid in the next 12 months.
It warned that the settlement was subject to documentation and it could take two months for the process to complete.
The exchange said that it would continue updating Earn users. It also expressed appreciation for the support and patience of its customers and recognized the hardships they have experienced.
It said that it was important for the company to return its customer’s assets in full and it was making complete efforts to do so.