Gemini agreed to return the final $50 million owed to Earn customers

Gemini Trust agreed on June 14, 2024 to provide approximately $50 million in digital assets to Gemini Earn customers under a settlement with the New York attorney general, resolving the state’s claims against the exchange while leaving its case against other defendants intact.

The court-filed stipulation required Gemini to distribute the remaining assets in kind within seven days. It also permanently restrained the company from directly or indirectly operating a cryptocurrency-lending business in New York, subject to a possible waiver if future state or federal legislation specifically permitted such programs.

The settlement mattered beyond its headline amount. It attached enforceable obligations to the final portion of one of the largest customer recoveries arising from the crypto-credit failures of 2022, while imposing operational restrictions and disclosure requirements on a major New York-regulated exchange.

The final portion of the Earn recovery

Gemini Earn allowed customers to lend digital assets to Genesis Global Capital through Gemini. The New York attorney general’s complaint alleged that Gemini portrayed Earn as low-risk and highly liquid despite internal analyses indicating that Genesis presented substantial financial risk. Those were allegations: the June 14 stipulation states that Gemini neither admitted nor denied them, apart from admitting jurisdiction.

Genesis suspended withdrawals on November 16, 2022. The stipulation says that at least 232,000 Earn customers, including at least 29,000 New Yorkers, then had approximately $1 billion in unreturned digital assets on a notional basis. Genesis and related entities filed for Chapter 11 protection on January 19, 2023.

A separate bankruptcy settlement approved in April 2024 created the mechanism for in-kind distributions. Gemini made an initial distribution on or about May 29, returning approximately 97% of the cryptocurrency owed as of the suspension date. The June 14 agreement covered the remaining approximately 3%, described in the filing as various cryptocurrencies with an approximate notional value of $50 million.

“In kind” was the economically important term. The obligation was based on the amount and type of cryptocurrency loaned, not merely its dollar value when withdrawals stopped. The stipulation illustrated the distinction by stating that a customer who had lent one bitcoin would receive one bitcoin through the combined distributions.

Gemini’s June 14 customer update said the final distribution would become available within seven days. That was a contemporaneous commitment, not confirmation that the last transfer had already occurred on June 14.

Enforcement terms extended beyond restitution

Gemini agreed to make the final distribution regardless of whether it received related recoveries from Digital Currency Group. It also had to provide the attorney general with proof of compliance after completing the distribution. If Gemini failed to deliver any portion, the state could seek judgment for the outstanding assets using a specified seven-day time-weighted average pricing process.

The agreement required Gemini to cooperate with New York’s continuing action involving Digital Currency Group, its chief executive Barry Silbert, former Genesis chief executive Soichiro Moro and the Genesis defendants. The obligations included producing records, authenticating documents, providing knowledgeable witnesses and giving truthful testimony when requested.

The settlement also required customer-facing disclosures. Among them, Gemini was to state that it was not registered with the Securities and Exchange Commission as a national securities exchange and had not been designated by the Commodity Futures Trading Commission as a contract market. It also had to propose risk disclosures and publish certain third-party listing or trading compensation.

What the record established on June 14

The strongest conclusion available on June 14 was that Gemini had entered an enforceable settlement designed to complete the Earn recovery and resolve New York’s claims against Gemini. The approximately $50 million figure was a notional valuation of multiple digital assets, not a cash fine paid to the state. The filing did not establish that every customer had withdrawn the final assets, nor did it resolve the allegations against the remaining defendants.