Crypto exchange Gemini founded by Winklevoss twins who are worth combined $2.8B will return $1.1 BILLION to customers and pay $37 million fine as NY AG Letitia James' lawsuit rages on

The fund is part of a settlement with the New York Department of Financial Services, the regulator said on Wednesday, while a separate lawsuit from New York Attorney General Letitia James still rages on.

Gemini's Earn program, which was offered in partnership with crypto lender Genesis Global Capital, was halted during a crypto market crash in November 2022. 

That dislocation caused Genesis to file for bankruptcy, and has led to extensive litigation against Genesis, Gemini and Genesis's parent company, Digital Currency Group.

The group went through a series of layoffs in 2022 and 2023, which created controversy when a video of the twins - each worth $1.4 billion according to Forbes - performing Journey's 'Don't Stop Believin'' with their cover band went viral days after a round of cuts.

Cryptocurrency exchange Gemini - run by billionaire twins Cameron and Tyler Winklevoss - will return at least $1.1 billion to customers of its defunct lending program and pay a fine of $37 million for unsafe and unsound practices.

The group went through a series of layoffs in 2022 and 2023, which created controversy when a video of the twins - each worth $1.4billion according to Forbes - performing Journey's 'Don't Stop Believin'' went viral days after a round of cuts

James earlier this month expanded her lawsuit against crypto firms Genesis and Gemini, tripling the size of their alleged fraud scheme to more than $3 billion.

The amended complaint builds on an October suit James filed against Digital Currency Group, its Genesis Global Capital unit, and Gemini Trust, the exchange run by the twin brothers.

She claimed they caused more than $1 billion of losses by misleading investors about the Gemini Earn program, which let customers lend crypto assets to Genesis in exchange for a high rate of return.

The attorney general said as more investors came forward, it became clear that 'the scam perpetrated by DCG through Genesis also ensnared investors who sent money directly to Genesis and were falsely assured their money was safe.

Many of the additional investors were small retail customers, including a chiropractor and a stay-at-home father who each invested $2 million of bitcoin with Genesis, the complaint said.

James is seeking more than $3 billion of restitution for the more than 230,000 investors who she believes were defrauded.

'This illegal cryptocurrency scheme, and the horrific financial losses that real people have suffered, are yet another reminder of why stronger cryptocurrency regulations are needed to protect all investors,' James said in a statement.

Barry Silbert, who is DCG's chief executive, and Soichiro Moro, a former Genesis chief executive, are also defendants. 

The fund is part of a settlement with the New York Department of Financial Services, the regulator said on Wednesday, while a separate lawsuit from New York Attorney General Letitia James rages on

Gemini's Earn program, which was offered in partnership with crypto lender Genesis Global Capital, was halted during a crypto market crash in November 2022

That dislocation caused Genesis to file for bankruptcy, and has led to extensive litigation between Genesis, Gemini and Genesis's parent company, Digital Currency Group

A DCG spokesman told DailyMail.com in a statement: 'There is nothing new here. This is the same baseless complaint recirculated to generate another round of press headlines. 

'We will fight the claims aggressively and we will win. DCG has always conducted its business lawfully and with integrity, and DCG and Barry Silbert will be fully vindicated.'

The agreement with the New York Department of Financial Services means Gemini's Earn customers, who have not been able to access the funds held in those accounts since late 2022, are one step closer to regaining access to their money.

NYDFS said on Wednesday that it retains the right to bring further action against Gemini if the company does not fulfill its obligation to return at least $1.1 billion to customers following the resolution of Genesis' bankruptcy. 

Gemini has pledged to contribute $40 million to the conclusion of Genesis' bankruptcy in order to benefit Earn customers, the regulator said.

Gemini is run by Cameron and Tyler Winklevoss - also known as the Winklevoss twins, who grabbed national attention for their legal battle against Meta Platforms' CEO Mark Zuckerberg. The company had previously sued DCG over the failure of their joint crypto lending partnership.

The two companies partnered in December 2020 to allow Gemini customers the chance to loan their crypto assets to Genesis in exchange for earning interest, ultimately collecting billions of dollars' worth of crypto assets from investors.

NYDFS claimed that Gemini failed to monitor and conduct due diligence on Genesis throughout the life of the Earn program and failed to maintain adequate reserves.

'Gemini failed to conduct due diligence on an unregulated third party, later accused of massive fraud, harming Earn customers who were suddenly unable to access their assets after Genesis Global Capital experienced a financial meltdown,' said NYDFS Superintendent Adrienne Harris in a statement. 

'Today´s settlement is a win for Earn customers, who have a right to the assets they entrusted to Gemini.'

In a blog post, Gemini said it has 'worked tirelessly over the past 15 months to advocate for Earn users and seek the return of their assets.' 

'Gemini thanks the New York Department of Financial Services (DFS) for its role in this settlement, which delivers a coin-for-coin recovery for Earn users.

Genesis is shutting down after filing for bankruptcy in January 2023.

Gemini, run by the Winklevoss twins known for their legal battles with Meta founder Mark Zuckerberg, touted Earn as 'low-risk' even when its internal analyses had found Genesis was on risky financial footing, James alleged.

Genesis bundled the funds into big loans for major players in the crypto space — including at one point a nearly $2 billion loan to Alameda Research, the hedge fund of disgraced FTX founder Sam Bankman-Fried. 

James is seeking more than $3 billion of restitution for the more than 230,000 investors who she believes were defrauded

Though the Alameda loan was recalled before the collapse of FTX sent shockwaves through the crypto industry, James alleges that it was one of the risky and under-secured loans that Gemini and Genesis concealed from Earn investors.

Days after the implosion of FTX in November 2022, Genesis suspended withdrawals, owing at least $1 billion to more than 232,000 Earn investors, including at least 29,000 New Yorkers, according to the new suit. 

Late Thursday, it reached a settlement with James' office, agreeing to pay on her fraud claims so long as it fully repays customers through the Chapter 11 process. That settlement requires a bankruptcy judge's approval.

Genesis filed for bankruptcy two months after halting withdrawals by Gemini Earn customers following the collapse of Sam Bankman-Fried's FTX cryptocurrency exchange.

Both Genesis and Gemini were also sued by the U.S. Securities and Exchange Commission, which said they bypassed disclosure requirements meant to protect Gemini Earn customers.

Last week, Genesis agreed to pay the SEC a $21 million fine, also contingent on its repaying customers first.

Gemini, meanwhile, has sued DCG over their failure of their crypto lending partnership.