- Gemini Trust Company and its founders are being sued for not registering Gemini Earn as a security.
- Investors who lost funds allege they were not given enough data to make an informed decision.
- Gemini has not updated Earn clients since suspending withdrawals after Genesis’ liquidity difficulties.
According to Bloomberg, a class action lawsuit has been filed against Gemini Trust Co. and its founders, Tyler and Cameron Winklevoss, on allegations that the cryptocurrency exchange unlawfully issued interest-bearing accounts without registering them as securities.
Investors claim the firm and its founders of fraud and breaches of the Exchange Act in a class-action lawsuit filed on Tuesday in the U.S. District Court for the Southern District of New York.
Launched in 2015 by Cameron and Tyler Winklevoss, Gemini offers a high-yield product called Gemini Earn that enables consumers to deposit their cryptocurrencies for interest, similar to a bank account, delivering yields of up to 8% on their holdings, depending on the asset.
Gemini unexpectedly suspended withdrawals for Earn last month when Genesis Global—the exchange’s primary partner—faced a liquidity problem amid the contagion created by the bankruptcy of FTX, Alameda Research, and dozens of other crypto businesses.
The plaintiffs allege that the Winklevoss brothers refused to “honor any further investor redemptions” after they had already halted them owing to their exposure to Genesis Global Capital. The filing further added they were not provided with the information necessary to make an informed decision about the risks of using Gemini Earn because the products were not registered.
Midway through November, shortly after the first reports revealed FTX’s financial troubles, Gemini began experiencing significant difficulties on Gemini Earn. Since suspending withdrawals in November, Gemini Earn has millions of dollars stuck on Genesis. There have been allegations that Genesis and its parent firm, Digital Currency Group (DCG), owe Gemini customers as much as $900 million.
Earlier this month, the New York-based corporation resorted to financial services firm Houlihan Lokey, which acts as the financial advisor of the creditor committee, to resolve the liquidity concerns at Genesis and DCG and create a roadmap for the recovery of assets.
On December 20, the exchange noted it continues to work with Genesis and DCG “with the utmost urgency,” with all parties “engaged and collaborative.”
Disclaimer: The information presented in this article is for informational and educational purposes only. The article does not constitute financial advice or advice of any kind. Coin Edition is not responsible for any losses incurred as a result of the utilization of content, products, or services mentioned. Readers are advised to exercise caution before taking any action related to the company.
