• A group of investors filed a class-action lawsuit against Gemini and the Winklevoss twins, accusing them of fraud and other crimes.
• The lawsuit claims that Gemini offered unregistered securities in the form of interest-bearing accounts.
• Gemini halted withdrawals for the interest-bearing program after the collapse of FTX, Alameda Research, and other crypto companies last month caused a liquidity problem at Genesis Global Capital.
Investors have filed a lawsuit against Gemini and its founders Tyler and Cameron Winklevoss, accusing them of fraud and other crimes, reports disclosed Tuesday. The class-action lawsuit, filed in Manhattan federal court, alleges that the U.S. cryptocurrency exchange offered unregistered securities in the form of interest-bearing accounts.
These interest-bearing accounts, called Gemini Earn, worked like a cryptocurrency savings account. Investors could deposit their cryptocurrency in exchange for interest. However, the lawsuit claims that Gemini refused to honor any further investor redemptions, thereby „wiping out“ all investors who still had assets in the program.
The lawsuit comes after a massive liquidation crisis last month caused by the bankruptcy of FTX, Alameda Research, and other crypto companies. The crisis caused a liquidity problem at Genesis Global Capital, and in response, Gemini immediately halted withdrawals for the interest-bearing contract. According to estimates, Genesis had $175 million invested in FTX prior to the bankruptcy filing of the exchange.
The lawsuit against Gemini and the Winklevoss twins alleges that they fraudulently misled investors, as they “knew or should have known” that the interest-bearing accounts were unregistered securities and that investors’ funds would be at risk in the event of a liquidity crisis.
The Winklevoss twins have yet to respond to the lawsuit, and the outcome of the case remains to be seen. However, if the investors in the class-action lawsuit are successful, it could result in a significant financial penalty for Gemini and the Winklevoss twins.