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Gemini to Return $1.1 Billion in Crypto to Earn Users After Genesis Bankruptcy

Gemini, a New York-based cryptocurrency exchange, announced on Wednesday that it has reached a settlement with Genesis and other creditors in the bankruptcy case of the crypto lending company, which will allow it to return $1.1 billion in digital assets to users of its Earn program.

Earn is a service that allows Gemini users to lend their crypto assets to Genesis and earn interest. However, in November 2022, Genesis filed for bankruptcy protection after suffering losses from a series of bad trades and defaulted on its obligations to Gemini and other lenders.

Since then, Gemini has been locked in a legal battle with Genesis and its creditors over the ownership and distribution of the crypto assets that were lent through the Earn program. Gemini claimed that it had a first-priority lien on the assets and that they should be returned to the Earn users in full.

According to Gemini, the settlement in principle, which is subject to approval by the Bankruptcy Court and definitive documentation, will result in all Earn users receiving 100% of their digital assets back in kind. This means that they will receive the same amount and type of crypto that they originally lent, plus any increase in value realized since.

Gemini said that it will be returning over $1.8 billion in value (at today’s prices) to the Earn users, which is $700 million more than when Genesis halted withdrawals in November 2022. Gemini also said that it will contribute $40 million to the recovery of the Earn users as part of the settlement.

Gemini expects to return approximately 97% of the assets in kind within about two months, and the remaining balance within the next 12 months, after the Bankruptcy Court approves the settlement. Gemini thanked the New York Department of Financial Services (DFS) for its role in facilitating the settlement, which it said delivers a coin-for-coin recovery for the Earn users.

“We’ve worked tirelessly over the past 15 months to advocate for Earn users and seek the return of their assets,” Gemini said in a blog post. “As responsible stewards of the crypto ecosystem, we know that our customers value the ability to hold their digital assets through the ups and downs of crypto market cycles. Being able to return assets on a coin-for-coin basis to our customers was critical for us.”

Gemini also said that it recognizes the hardship presented by the lengthy process and that it is deeply appreciative of its customers’ patience and support along the way. It also said that it will keep the Earn users informed of the progress of the settlement and the return of their assets.

The settlement comes a week after Gemini sued Genesis for control of $1.6 billion in Grayscale Bitcoin Trust (GBTC) shares, which are also part of the collateral that Genesis pledged to Gemini. Gemini alleged that Genesis breached its contract and fiduciary duty by transferring the GBTC shares to a third-party custodian without Gemini’s consent. Gemini sought a court order to freeze the GBTC shares and prevent Genesis from selling or transferring them.

Genesis has not yet commented on the settlement or the lawsuit.

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