Crypto lender Genesis allegedly owes $900M to Gemini’s clients: Report
The issue is tied to the Gemini Earn program, which offers 8% earn interest on crypto lending and is operated by Gemini in partnership with Genesis.
Crypto lender Genesis and its parent company Digital Currency Group (DCG) allegedly owe $900 million to Gemini’s clients, according to a Financial Times report disclosed on Dec. 3, citing people familiar with the matter.
The issue derives from the FTX dramatic collapse in November. Crypto exchange Gemini operates a product called Gemini Earn in partnership with Genesis, offering investors the opportunity to earn 8% in interest by lending out their crypto, including Bitcoin and stablecoins pegged to fiat currencies.
On Nov. 16, Genesis announced it had temporarily suspended withdrawals citing “unprecedented market turmoil,” days after disclosing around $175 million worth of funds stuck in an FTX trading account. Genesis is reportedly facing difficulties raising money for its lending unit but refuted speculation of its “imminent” bankruptcy.
Also on Nov. 16, Gemini Earn started experiencing issues with deposits, according to the exchange status page. The product remains unavailable at the time of writing, while all other Gemini services, including the exchange trading engine and the Gemini Credit Card, remain available.
Gemini has formed a creditor’s committee and is working to recoup the funds from Genesis and DCG, noted the report. In an effort to restore clients’ trust amid fears of contagious spread following FTX’s fall, Gemini announced on Nov. 29 its Trust Center, a dashboard showing metrics for funds held by Gemini and on the exchange’s behalf.
In the Twitter thread about the Trust Center, however, Earn program clients stated they would regain their trust once withdrawal earnings resumed.
Gemini will not be trusted by anyone if the EARN situation is not resolved for your customers. Do not create and market a product that has absurd risk to your customer’s funds. Not ethical for Gemini to collect fees but take no responsibility. Not good care for your customers.
— Clint (@Az78Clint) November 30, 2022
Gemini’s Earn program was launched in 2021 in the United States. As of November 2022, it operates in more than 65 countries, including new jurisdictions like Croatia, Cyprus, Czech Republic, Denmark, Hungary, Ireland, Latvia, Liechtenstein, Portugal, Romania, Slovenia, Sweden and others, the firm said. The exchange was hit by the ongoing crypto bear market, cutting up to 20% of its staff this year.
Gemini and Genesis did not immediately respond to Cointelegraphs’ requests for comments.