New York recovers $50 million for defrauded Gemini Earn crypto investors

FILE PHOTO: A man walks past the logo of Gemini Trust, a digital currency exchange and custodian, during the Bitcoin Conference 2022 in Miami Beach, Florida, U.S. April 6, 2022. REUTERS/Marco Bello/File Photo

NEW YORK (Reuters) -New York Attorney General Letitia James has recovered $50 million from the cryptocurrency platform Gemini Trust to repay investors defrauded in its Gemini Earn program, she said on Friday.

Gemini, run by billionaire twin brothers Cameron and Tyler Winklevoss, will provide full recoveries to more than 230,000 Earn investors, including 29,000 in New York, and agreed to a ban on operating crypto lending programs in the state.

The payout is in addition to James' related $2 billion settlement with crypto lender Genesis Global Capital, which she announced on May 20.

"Gemini marketed its Earn program as a way for investors to grow their money, but actually lied and locked investors out of their accounts," James said. "Today's settlement will make defrauded investors whole."

The funds will be accessible within seven days, Gemini told investors on Friday. "With this final distribution, Earn users will have received 100% of the assets owed to them," it said.

Gemini Earn promised high interest rates to investors who lent crypto assets such as bitcoin to Genesis, a unit of Digital Currency Group, with Gemini taking fees that could exceed 4%.

More than $1 billion was frozen when Genesis halted redemptions in November 2022, shortly after the collapse of Sam Bankman-Fried's FTX cryptocurrency exchange. Genesis filed for Chapter 11 bankruptcy two months later.

Gemini did not admit or deny wrongdoing in agreeing to settle. New York's top financial regulator fined Gemini $37 million in February for compliance failures.

Investors are expected to recover more than they invested because they are being paid in digital assets such as bitcoin, whose value has more than tripled since redemptions were suspended.

Gemini also agreed to cooperate in James' October fraud lawsuit against Digital Currency Group and its chief executive, Barry Silbert. They have called her claims baseless.

Spokespeople for Digital Currency Group did not immediately respond to requests for comment on Gemini's settlement.

The Winklevoss twins are each worth $2.7 billion, Forbes magazine said.

(Reporting by Jonathan Stempel in New York; Editing by Richard Chang)

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