Gemini Cleared of Misleading Users in Earn Lending Program Saga

Gemini, the cryptocurrency exchange founded by Tyler and Cameron Winklevoss, has won a significant legal battle in its ongoing Earn lending program saga. An arbitrator ruled that Gemini did not mislead users or contribute to the collapse of its Earn lending program.

The claim was filed by an Earn user who alleged Gemini had lied to customers about the safety of their assets and failed to do due diligence with Genesis Global Capital, its main lending partner. However, the arbitrator found that there was insufficient evidence to support these claims.

Instead, the arbitrator pointed to Genesis, which is run by Digital Currency Group's Barry Silbert, alleging 'massive' fraud on its part. Silbert and DCG are facing several multibillion-dollar lawsuits accusing them of defrauding investors. Last year, DCG agreed to pay the Securities and Exchange Commission $38.5 million for misleading investors.

The ruling is a significant victory for Gemini, which had been under fire from users who were unable to withdraw their assets from the Earn program in 2022. The program allowed users to reap up to 7.4% annual yields on their cryptocurrencies by lending them out to institutional borrowers through Genesis. In November 2022, Gemini halted withdrawals from its Earn program due to a liquidity crunch faced by Genesis.

The arbitrator's ruling noted that there was insufficient evidence of an actual or perceived threat to the user's physical safety, and therefore no claim for negligent infliction of emotional distress could be made. The scope of the alleged fraud on Genesis' part is massive, the arbitrators said, adding that it went undetected by auditors and regulatory authorities until Gemini discovered it.