• Gemini halted the Interest-Earning program abruptly post-FTX collapse. 
• The program used to provide interest on assets kept. But the firm failed to register them as securities as per the law. 
• Post-halting, the company did nothing to cater to the investors. 

It seems that Gemini customers are caught in the crossfire, as the daughter company of the Digital Currency Group (DCG) has been sued by investors over their Interest-earning Program as per the court filings from December 27, 2022. 

Investors Max J. Hastings and Brendan Picha filed the class action lawsuit on behalf of “others similarly situated” in the United States Southern District Court of New York. According to the complaint, they are seeking a trial by jury. 

Max and Brendan say that Gemini’s Interest Earn Program provided upto 7.4% interest to customers against their crypto assets. Still, the program did not register those assets as securities which it should have following the United States Securities Law. 

Filing further highlights the sudden halt of the program around November 16, 2022, after the once third largest crypto exchange filed for chapter 11 bankruptcy in Delaware bankruptcy court on November 11, 2022. 

The contagion risk that followed the collapse engulfed the whole crypto industry and caused a liquidity crisis for Genesis Trading, a sister company of Gemini and Coin Desk. Gemini suffered a high influx of $485 million in withdrawals citing the same contagion risk. 

“When Genesis encountered financial distress as a result of a series of collapses in the crypto market in 2022, including FTX Trading Ltd. Genesis was unable to return the crypto assets it borrowed from Gemini Earn investors.”

The alleged Interest-Earning Program was abruptly halted, and the firm refused to respect any future investors’ redemptions, eventually wiping out all investors who still held funds in the infamous program, including the plaintiffs of the case. 

All the crypto firms who had suffered financial distress after the crypto winter, FTX saga and Terra ecosystem collapse and are still unable to recoup their customers are now facing multiple lawsuits being filed by investors who are trying to recover their losses. 

The latest news on the FTX trial

Sam Bankman-Fried is about to face trial regarding a series of allegations in the Southern District of New York. However, the dates are not announced yet. The case will be presided over by Lewis A. Kalpan, who had previously presided over writer E.Jean Carroll’s lawsuit against former president Donald Trump. 

The FTX case was to be handled by Ronnie Abrams, who stepped down after her husband’s involvement surfaced. He was a partner at Davis Polk & Wardwell LLP, which were advisors of FTX. 

SBF is currently living with his parents in California and is out on a $250 million bond. He might enter a plea where Sam will be presented with three options, “Plead Guilty, Plead Not Guilty, and/or No Contest.” Further trials will continue based on the option Bankman selects. 

Former CTO Gary Wang and Alameda’s Caroline Elison have already pleaded guilty to some allegations and are reportedly cooperating with federal officials. 

Nancy J. Allen

Nancy J. Allen is a crypto enthusiast, with a major in macroeconomics and minor in business statistics. She believes that cryptocurrencies inspire people to be their own banks, and step aside from traditional monetary exchange systems. She is also intrigued by blockchain technology and its functioning. She frequently researches, and posts content on the top altcoins, their theoretical working principles and technical price predictions.