Customers of Gemini’s cryptocurrency lending program, which had assets frozen, are set to receive a substantial restitution of their digital tokens, effective from the night of May 29. This development marks a significant milestone in the resolution of one of the major crypto lending crises.
In Singapore alone, 16,554 Gemini Earn accounts are slated to regain their digital assets, collectively valued at approximately $182 million, based on the market prices as of 10 PM on May 28, 2024. The broader restitution effort will see a total of 232,000 Earn users reclaiming an estimated US$2.18 billion (S$2.9 billion) in digital assets.
Gemini confirmed in a statement that customers will receive back the exact amount of cryptocurrency they had lent. For example, if a customer lent one Bitcoin, they would get one Bitcoin returned. This mechanism allows customers to benefit from the recent appreciation of digital assets, with Bitcoin currently priced at around US$68,000, a substantial rise from its US$17,600 value in November 2022.
The firm announced that 97 percent of the digital assets in the program would be returned immediately, with the remaining assets expected to be fully restituted within the next 12 months. Gemini highlighted this recovery as “unprecedented” in the context of both crypto and general bankruptcies. This achievement follows the company’s previous announcement of a settlement in principle with Genesis and other creditors involved in the Genesis bankruptcy, ensuring that all Earn users will receive 100 percent of their digital assets back in kind.
The Earn program allowed Gemini customers to lend their digital assets to Genesis Global, a third-party crypto borrower. Offered in Singapore, Hong Kong, and the US, the program was significantly impacted when Genesis, backed by Singapore’s sovereign wealth fund GIC, halted redemptions in November 2022 following the collapse of FTX.
FTX’s downfall precipitated a series of financial calamities, leading to the bankruptcy of Genesis Global and severely affecting Gemini. The situation was exacerbated when Genesis froze withdrawals, compelling Gemini to pause redemptions on Earn accounts, leaving 232,000 users unable to access their lent digital assets, valued at roughly US$940 million at the time.
The public fallout involved a contentious exchange between Gemini’s co-founders, Tyler and Cameron Winklevoss, and Barry Silbert, CEO of Digital Currency Group (DCG), Genesis’s parent company. Genesis filed for bankruptcy in January 2023, further complicating the resolution process.
After months of negotiations, a tentative in-principle settlement was announced in February 2023 involving DCG, Genesis, Gemini, and other creditors. Gemini contributed US$50 million to aid in the recovery of Earn users’ assets, underscoring its commitment to resolving the crisis.
Tyler Winklevoss, co-founder and CEO of Gemini, remarked, “It’s important to note that the Genesis bankruptcy was not a crypto problem. It was old-fashioned financial fraud compounded by a lack of regulatory clarity. To that end, we will continue to fight for clear rules and guidance for our industry that foster both innovation and consumer protection.”
Founded in 2014, Gemini operates in approximately 70 countries, with Singapore being its second-largest market after the US. The firm’s Singapore arm, Gemini Trust Company, is currently functioning under an exemption while it seeks a full operating license. The Winklevoss twins have expressed intentions to expand their operations in Singapore, as part of a strategy to mitigate regulatory challenges faced in the US.
The restitution of assets to Gemini’s Earn users not only marks a critical recovery in the cryptocurrency space but also sets a precedent for how such crises might be resolved in the future.
