Crypto billionaires and founders of the Gemini cryptocurrency exchange, Tyler and Cameron Winklevoss, are being sued by investors over their interest-earning program, Gemini Earn.
in a proposed class-action complaint filed In Manhattan federal court on Tuesday, crypto investors accused the Winklevoss twins and their exchange of fraud and violations of the Exchange Act, arguing that the platform failed to register their interest-earning accounts as securities.
The Gemini Trust Earn program offered high-interest accounts, allowing investors to lend their crypto assets to Gemini in exchange for 8% interest payments.
However, in mid-November the platform stopped redemptions after Genesis Global, a subsidiary of Digital Currency Group and a major partner of Gemini, got caught up in the crypto transition due to the explosion of Sam Bankman-Fried’s FTX.
“Gemini refused to honor any investor redemptions, effectively wiping out all investors who still had access to the program,” the investors said in the complaint. He argued that if the platforms had registered the products, they would have received disclosures that would have allowed them to better assess the risks. The complaint reads:
“Gemini repeatedly marketed the GIA with false and misleading statements, including that the GIA was a safe way to collect interest. Gemini also omitted and concealed important information relating to the risks associated with Gemini Earn. which included information regarding its purported partner and borrower of the program, Genesis Global Capital, LLC (“Genesis”), to which it lent the crypto assets of all Gemini Earn investors.
Since the exchange halted withdrawals, Gemini Earn has been unavailable to users as millions of dollars on the platform are stuck at genesis. In a December 23 update, the company Said It is working with “the utmost urgency” to resolve the liquidity issues at Genesis.
as Reported, Genesis sought a $1 billion emergency loan before closing redemptions for customers in mid-November. The company acknowledged that it was facing “liquidity constraints due to certain illiquid assets on its balance sheet” and said it was “mainly running on deposits driven by retail programs and partners” and “liquidity by institutional clients”. to test”.
The collapse of FTX has created a swift and far-reaching contagion, affecting many companies in the space. Furthermore, the event pushed crypto prices to record lows, further exacerbating the ongoing crypto meltdown that began with the collapse of Terra’s algorithmic stablecoin UST.
As of now, bitcoin is trading at $16,597, down 76% from its all-time high of $69,044 recorded in November last year. Amidst all the turmoil, the broader crypto market has also been down badly this year.
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