Bankrupt crypto lender Genesis and Gemini return over $2 billion to customers

Genesis, a bankrupt cryptocurrency lender, and Gemini, a cryptocurrency exchange, have refunded more than $2 billion in cryptocurrency to 232,000 retail clients through their jointly managed Gemini Earn program, Gemini revealed Wednesday. This return has provided consumers with a 242 per cent return on assets locked up since January 2023.

Unlike many cryptocurrency companies that went bankrupt following the 2022 market crash, Genesis was able to return consumers' cryptocurrencies rather than liquidating a small pool of assets and compensating them in cash. Customers who loaned Genesis one bitcoin will receive one bitcoin back, profiting greatly from the coin's price increase since the company entered bankruptcy. Bitcoin's price has more than tripled since January 2023, reaching $67,000.

"We are thrilled to have been able to achieve this recovery for our customers," stated Gemini co-founder Cameron Winklevoss in a press release. "We recognise the hardship caused by this lengthy process and appreciate our customers' continued support and patience throughout." Approximately 97 per cent of the payments will be delivered to Gemini customers immediately, with the remainder due within 12 months.

Genesis had anticipated that its clients, including larger investors outside of the Earn program, would earn a 77 per cent recovery rate during the bankruptcy.

"We didn't cap their claims at the petition date value," Genesis attorney Sean O'Neal said on Wednesday. "Now we need to focus on making distributions to Genesis's remaining creditors." Customers in the Gemini Earn program lent their bitcoin to Genesis, earning interest on the leased assets. Gemini Earn's entire asset worth was $940 million when Genesis blocked user accounts in November 2022, according to Gemini.

New York Attorney General Letitia James has accused the Gemini Earn program of being a "scam" that misled investors, prompting a lawsuit against Genesis, Gemini, and Genesis' parent business, Digital Currency Group (DCG).

James negotiated an agreement with Genesis in February, ordering the firm to refund Earn customers before other creditors such as New York State and DCG. "When investors suffer losses because of fraud and manipulation, they deserve to be made whole," said James.

DCG stated that Genesis consumers should be compensated based on the worth of the crypto assets in January 2023. Under this theory, which was overruled by a judge on May 17, DCG could have claimed the "excess" value from the increase in cryptocurrency prices rather than returning it to Genesis consumers.

James' lawsuit hampered Genesis’s efforts to restart its operations, leading the company to declare bankruptcy.

(With inputs from Reuters)