<p>Crypto exchange Gemini and its owners, Tyler and Cameron Winklevoss, were sued by investors with a class-action lawsuit over the interest-bearing accounts, which promised up to 7.4 percent <a href="https://www.financemagnates.com/terms/y/yield/" target="_blank" id="cfaa38df-248b-415d-a58f-1c65a6b5fdac_1" class="terms__main-term">yield</a> to customers for lending cryptocurrencies.</p><p>Gemini Faces Class-Action Lawsuit</p><p>Brendan Picha and Max J. Hastings filed the class-action lawsuit in the US Southern District Court of New York for themselves and “others similarly situated.” The lawsuit accused the exchange and its owners of fraud and violations of the Exchange Act.</p><p><a href="https://www.financemagnates.com/cryptocurrency/gemini-gains-crypto-licenses-in-italy-and-greece/" target="_blank" rel="follow">Gemini abruptly halted</a> the redemption of its interest-bearing crypto products, which were offered under Gemini Trust Earn, in mid-November, just after Sam Bankman-Fried’s FTX filed for bankruptcy. The move was made as the FTX collapse triggered a <a href="https://www.financemagnates.com/cryptocurrency/crypto-lender-genesis-seeks-1b-emergency-loan/" target="_blank" rel="follow">liquidity crisis at Genesis Trading</a>, a major borrower of Gemini’s lending products.</p><p>“When Genesis encountered financial distress as a result of a series of collapses in the crypto market in 2022, including FTX Trading Ltd. (“FTX”), Genesis was unable to return the crypto assets it borrowed from Gemini Earn investors,” the court filing stated, adding: “[Gemini] refused to honor any further investor redemptions, effectively wiping out all investors who still had holdings in the program, including plaintiffs.”</p><blockquote class="twitter-tweet"><p lang="en" dir="ltr">This is when they file for good old Chapter 11 protection so they can spend creditors money “<a href="https://twitter.com/hashtag/Gemini?src=hash&ref_src=twsrc%5Etfw">#Gemini</a> & its founders Tyler & Cameron Winklevoss are facing a class-action lawsuit over claims the crypto exchange sold interest-bearing accounts without registering them as securities.” <a href="https://t.co/lkOoN6kx3N">https://t.co/lkOoN6kx3N</a></p>— Simon Dixon (@SimonDixonTwitt) <a href="https://twitter.com/SimonDixonTwitt/status/1608088015397847043?ref_src=twsrc%5Etfw">December 28, 2022</a></blockquote><p>The plaintiffs believe that if the interest-bearing crypto products were registered as securities in accordance with the US securities law, the investors would have disclosures to understand the risks better.</p><p>An advertisement of Gemini Earn.</p><p>Regulators against Crypto-Lending Products</p><p>In the US, regulators are reportedly investigating the <a href="https://www.financemagnates.com/terms/c/crypto-lending/" target="_blank" id="f93b5d7e-2219-4a1d-a7a8-bbcf45e69e8c_2" class="terms__secondary-term">crypto lending</a> products such as interest-bearing accounts. Though the regulators did not formally indict any company yet, they <a href="https://www.financemagnates.com/cryptocurrency/news/blockfi-to-pay-100-million-for-settlement-with-sec-and-states/" target="_blank" rel="follow">settled with now-bankrupt BlockFi for $100 million</a> with a condition of not taking new US customers. In addition, federal and state regulators are reportedly <a href="https://www.financemagnates.com/cryptocurrency/news/celsius-network-reportedly-faces-us-federal-investigation/" target="_blank" rel="follow">investigating the offerings of Celsius</a>, another crypto-lending service provider.</p><p>Meanwhile, several crypto-lending companies were severely exposed to the crypto mammoths that collapsed this year. <a href="https://www.financemagnates.com/cryptocurrency/crypto-lender-blockfi-files-for-bankrupty-protection-in-the-us/" target="_blank" rel="follow">BlockFi filed for bankruptcy</a> due to its deep ties with FTX and is now fighting for the <a href="https://www.financemagnates.com/cryptocurrency/blockfi-sues-sam-bankman-fried-over-robinhood-stock-collaterals/" target="_blank" rel="follow">rights of Bankman-Fried-owned Robinhood shares</a>. Furthermore, Singapore-based Vauld halted activities and is currently ongoing restructuring.</p>
This article was written by Arnab Shome at www.financemagnates.com.
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