Investors sue cryptocurrency exchange Gemini for fraud
The class action lawsuit alleges that the platform, which suspended payments to customers in mid-November, violated U.S. securities laws
Investors have sued Gemini Trust Co. and its founders, brothers Tyler and Cameron Winklevoss, Bloomberg reported. The class action lawsuit was filed in federal court in Manhattan on Dec. 27. The defendants are accused of fraud and violating the U.S. Securities Act of 1934.
According to the lawsuit, they offered a product that was not registered as a securities product, although it should have been. The EARN product at issue in the lawsuit allowed investors to earn up to 8 percent per annum. They did this by lending their assets to institutional borrowers.
Gemini, a U.S.-listed centralized exchange, ranks 15th on the list of the largest crypto platforms in terms of reliability, according to CoinGecko. Daily trading volume on the site in the past 24 hours is $24.6 million.
In mid-November, Gemini stopped making payments to clients on the EARN program and explained that the program's lending partner, Genesis Global Capital, could not repay debts and suspended new loans to clients due to the collapse of FTX. Gemini reported Nov. 16 that the payment restriction was imposed for five days.
The class action lawsuit said Gemini "refused to make any further payments to investors, effectively wiping out the capital of investors who still had stakes in the program." If the products had been registered, investors said, they would have received information that would have allowed them to better assess risk.
The platform's Web site says Gemini is in ongoing talks with Genesis, its parent company Digital Currency Group (DCG) and DCG CEO Barry Silbert to find a solution. On Dec. 23, the company said it was working with "maximum urgency" around the clock.
At the beginning of December it became known that the Genesis credit platform, which suspended payments to customers due to the collapse of the FTX exchange, owes at least $1.8 billion to its creditors, of which $900 million is owed to a group of clients who use the EARN program on the Gemini platform.