The platform abruptly halted its Gemini Earn program in November, “effectively wiping out” investors who still had holdings, according to a court filing.
Crypto exchange Gemini is being sued by investors over the sale of interest-earning crypto products, court filings from Tuesday show.
Investors Brendan Picha and Max J. Hastings filed a class action lawsuit on behalf of themselves and “others similarly situated,” with the U.S. Southern District Court of New York. They are seeking a trial by jury, according to the complaint.
Picha and Hastings say Gemini’s Earn program – which offered interest of up to 7.4% to customers for lending their crypto assets – didn’t register those assets as securities in accordance with U.S. securities law. The filing says Gemini abruptly halted the program around Nov. 16 after crypto exchange FTX filed for bankruptcy and contagion from its fall caused a liquidity crisis at Genesis Trading, which functioned as Gemini’s borrower. Genesis is owned by Digital Currency Group, which is also the parent of CoinDesk.
“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 filing said, adding that after the Gemini Earn program was halted, the company “refused to honor any further investor redemptions, effectively wiping out all investors who still had holdings in the program, including Plaintiffs.”
Crypto firms that suffered financial distress following the market downturn and collapse of high profile enterprises like FTX and Terraform Labs from earlier this year are now facing a barrage of lawsuits from investors attempting to recover their losses.
CoinDesk has reached out to Gemini for comment.
Source: Crypto Insider