Written by Dietrich Knuth
NEW YORK (Reuters) – Bankrupt cryptocurrency bank Genesis and cryptocurrency exchange Gemini have 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, they said. Gemini reported on Wednesday.
Unlike other cryptocurrency companies that went bankrupt after the 2022 market crash, Genesis was able to return customers' cryptocurrencies to them instead of liquidating a limited pool of assets and paying them back in cash.
Gemini said that customers who loaned one bitcoin to Genesis will receive one bitcoin back, benefiting from the significant increase in the price of the currency since the date of the company's bankruptcy. Its price has more than tripled since January 2023, rising to more than $67,000.
“We are pleased to have been able to achieve this recovery for our customers,” Gemini co-founder Cameron Winklevoss said in a statement. “We recognize the difficulties caused by this long process and appreciate our customers' continued support and patience throughout.”
Gemini customers will receive about 97% of the payment immediately and the rest within 12 months, Gemini said.
Genesis had previously estimated that its clients, including major investors who were not part of the Earn program, would receive a 77% recovery in the event of bankruptcy. Gemini said its clients benefited from a $50 million settlement contribution made by Gemini, as well as settlements that allowed Genesis to sell shares in Grayscale Bitcoin and Ethereum funds.
Gemini customers who participated in the Gemini Earn program loaned their cryptocurrencies to Genesis and earned interest on their borrowed 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 has alleged that Gemini Earn was a “scam” that misled investors, and she has sued Genesis, Gemini and Genesis' parent company Digitalcurrency Group over the program.
James reached a settlement with Genesis in February, which required Genesis to repay EARN customers before other creditors, including the state of New York and the cryptocurrency group.
DCG argued that Genesis customers should be repaid based on the value of the cryptocurrency assets in January 2023. Under that argument, which the judge overturned on May 17, DCG could have taken the “excess” value from rising cryptocurrency prices, instead. From returning it to Genesis customers.
James' lawsuit stalled Genesis' efforts to restart its business, prompting the company to instead file for bankruptcy liquidation.