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Gemini Customers Get Back Over $2 Billion in Crypto From Genesis Bankruptcy
By Dietrich Knauth
NEW YORK (Reuters) – Failed cryptocurrency bank Genesis and cryptocurrency exchange Gemini returned more than $2 billion in cryptocurrencies to 232,000 retail customers in their jointly managed Gemini Earn program, giving customers a 242% return on assets locked since January 2023, Gemini said on Wednesday.
Unlike other crypto companies that went bankrupt after the 2021 market crash, Genesis was able to return customers’ crypto to them rather than liquidating a limited set of assets and returning them in cash.
Customers who lent Genesis one bitcoin will receive one bitcoin back, benefiting from the currency’s dramatic price increase since the company went bankrupt, Gemini said. The price of Bitcoin has more than tripled since January 2023, rising to over $67,000.
“We are thrilled to have achieved this recovery for our customers,” Gemini co-founder Cameron Winklevoss said in a statement. “We recognize the difficulties caused by this lengthy process and appreciate our customers’ continued support and patience throughout the process.”
Gemini customers will receive about 97% of their refund immediately and the remainder within 12 months, Gemini said.
Genesis had previously estimated that its clients, including large investors who were not part of the Earn program, would receive a 77% recovery in bankruptcy. Gemini said its clients benefited from a $50 million settlement contribution made by Gemini, as well as agreements that allowed Genesis to sell shares in Grayscale bitcoin and ethereum funds.
Gemini customers who participated in the Gemini Earn program lent their cryptocurrencies to Genesis and received interest on the lent assets. The total value of Gemini Earn’s assets was $940 million when Genesis froze customer accounts in November 2022, Gemini said.
New York Attorney General Letitia James alleged that the Gemini Earn program was a “scam” that deceived investors and sued Genesis, Gemini, and Genesis’ parent company, Digital Currency Group, over the program.
James reached a settlement with Genesis in February that required Genesis to reimburse Earn customers before other creditors, including the state of New York and Digital Currency Group.
DCG argued that Genesis customers should be reimbursed based on the value of crypto assets in January 2023. Under that argument, which a judge rejected on May 17, DCG could have taken the “excess” value of the increase in cryptocurrency prices rather than returning it to Genesis customers.
James’ lawsuit halted Genesis’ efforts to restart its business, leading the company to move toward bankruptcy liquidation.
(Reporting by Dietrich Knauth; Editing by Josie Kao)