Gemini customers get back over $2 billion in crypto from Genesis bankruptcy
Adds comment from Genesis lawyer, NY attorney general in paragraphs 7 and 11
By Dietrich Knauth
NEW YORK, May 28 (Reuters) -Bankrupt crypto lender Genesis and crypto exchange Gemini have returned over $2 billion in crypto to 232,000 retail customers in their jointly managed Gemini Earn program, giving customers a 242% return on assets locked up since January 2023, Gemini said on Wednesday.
Unlike other crypto companies that went bankrupt after a 2022 market crash, Genesis was able to return customers' crypto to them rather than liquidating a limited pool of assets and paying them back in cash.
Customers who loaned one bitcoin to Genesis will get one bitcoin back, benefiting from the coin's dramatic price increase since the date the company went bankrupt, Gemini said. The price of Bitcoin has more than tripled since January 2023, rising to over $67,000.
"We are thrilled to have been able to achieve this recovery for our customers," Gemini co-founder Cameron Winklevoss said in a statement. "We recognize the hardship caused by this lengthy process and appreciate our customers' continued support and patience throughout."
Gemini customers will receive about 97% of the repayment immediately and the remainder within 12 months.
Genesis had previously estimated that its customers, including larger investors that were not part of the Earn program, would receive a 77% recovery in the bankruptcy.
"We didn’t cap their claims at the petition date value," Genesis attorney Sean O'Neal said Wednesday. "Now we need to focus on making distributions to Genesis's remaining creditors."
Gemini customers who participated in the Gemini Earn program loaned their crypto to Genesis and were paid interest on their loaned assets. The total value of the Gemini Earn assets was $940 million when Genesis froze customer accounts in November 2022, Gemini said.
New York Attorney General Letitia James has alleged that the Gemini Earn program was a "scam" that misled investors, and she has sued Genesis, Gemini and Genesis's parent company Digital Currency Group over the program.
James reached a settlement with Genesis in February that required Genesis to repay Earn customers before other creditors, including New York state and Digital Currency Group.
"When investors suffer losses because of fraud and manipulation, they deserve to be made whole," James said in a statement.
DCG had argued that Genesis's customers should be repaid based on what the crypto assets were worth in January 2023. Under that argument, which a judge overruled on May 17, DCG could have taken the "excess" value from the rise in crypto prices, rather than returning it to Genesis customers.
James' lawsuit disrupted Genesis's efforts to re-start its business, pushing the company to pivot instead to a bankruptcy liquidation.
Reporting by Dietrich Knauth; Editing by Josie Kao and David Gregorio
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