Proposed Class-Action Suit Centers on Gemini Earn Products

Gemini Trust Company is facing a proposed class-action suit involving its Gemini Earn products.

The crypto asset exchange and its founders, Tyler and Cameron Winklevoss, have been sued by investors who accused them of fraud and violations of the Exchange Act, saying they failed to register their Gemini Earn interest-bearing accounts as securities, Bloomberg reported Wednesday (Dec. 28).

While the products were said to have the potential to generate 8% interest on holdings, Gemini halted the redemptions in mid-November when a key partner, Genesis Global, got caught up in the turmoil around the implosion of FTX, according to the report.

Gemini “refused to honor any further investor redemptions, effectively wiping out all investors who still had holdings in the program,” the investors’ complaint said, adding that they would have been better able to assess the risks had they received disclosures, the report said.

The company’s customer agreement said the products are uninsured and carry risks, but the investors said Gemini’s marketing deemphasized the terms and misled them into believing the products were safe, according to the report.

Gemini Trust was among the crypto firms that came under the Securities and Exchange Commission (SEC) microscope in January because of an inquiry into companies paying interest on virtual token deposits.

Bloomberg reported at the time that Gemini Trust, Voyager Digital and Celsius Network were subjects of a review focused on whether their offerings would have to be registered as securities with the SEC.

The firms had the ability to pay customers higher rates than many bank savings accounts because they lend out their digital coins to other investors — a practice the SEC said raised concerns about investor protection.

A Gemini spokesperson told PYMNTS at the time, “We are one of many companies the SEC has reached out to regarding crypto yield products. We are cooperating voluntarily with this industry-wide inquiry.”

In June, the Commodity Futures Trading Commission (CFTC) announced a complaint against Gemini Trust over allegedly false or misleading statements regarding a bitcoin futures product.

The CFTC alleged that, from July 2017 through around December of that year, Gemini made misleading statements about the possible self-certification of a bitcoin futures contract through a designated contract market.

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