Crypto Billionaires Winklevoss Twins Accused of Fraud and Securities Law Violations by Investors

Author

Ruholamin Haqshanas

Author

Ruholamin Haqshanas

About Author

Ruholamin Haqshanas is a contributing crypto writer for CryptoNews. He is a crypto and finance journalist with over four years of experience. Ruholamin has been featured in several high-profile crypto...

Author Profile

Share

Copied

Last updated: 

June 26, 2023

Why Trust Cryptonews

Cryptonews has covered the cryptocurrency industry topics since 2017, aiming to provide informative insights to our readers. Our journalists and analysts have extensive experience in market analysis and blockchain technologies. We strive to maintain high editorial standards, focusing on factual accuracy and balanced reporting across all areas - from cryptocurrencies and blockchain projects to industry events, products, and technological developments. Our ongoing presence in the industry reflects our commitment to delivering relevant information in the evolving world of digital assets. Read more about Cryptonews

Crypto billionaires and founders of the Gemini cryptocurrency exchange, Tyler and Cameron Winklevoss are being sued by investors over their interest-earning program Gemini Earn.

In a proposed class-action complaint filed Tuesday in Manhattan federal court, crypto investors accused the Winklevoss twins and their exchange of fraud and violations of the Exchange Act, arguing that the platform failed to register their interest-earning accounts as securities. 

Gemini Trust Earn program offered high-interest accounts, allowing investors to lend their crypto assets to Gemini in exchange for as much as 8% interest payments. 

However, the platform halted redemptions in mid-November after Genesis Global, a subsidiary of Digital Currency Group and a key partner of Gemini, became ensnared in the crypto contagion caused by the implosion of Sam Bankman-Fried’s FTX.

Gemini “refused to honor any further investor redemptions, effectively wiping out all investors who still had holdings in the program,” the investors said in the complaint. They argued that if the platform had registered the products, they would’ve received disclosures that would have let them assess the risks better. The complaint reads:

“Gemini marketed GIAs with repeated false and misleading statements, including that GIAs were a secure method of collecting interest. Gemini also omitted and concealed significant information concerning the risks associated with Gemini Earn, including information concerning its so-called partner and borrower in connection with the program, Genesis Global Capital, LLC (“Genesis”), to which it gave all Gemini Earn investors’ crypto assets.”

Ever since the exchange halted withdrawals, Gemini Earn remains unavailable for users as the platform has millions of dollars stuck on Genesis. In a December 23 update, the company said it’s operating with the “utmost urgency” to resolve the liquidity issues at Genesis.

As reported, Genesis asked for an emergency loan of $1 billion before closing redemptions for clients in mid-November. The company admitted that it was experiencing a “liquidity crunch due to certain illiquid assets on its balance sheet” and added that it faced an “ongoing run on deposits driven mainly by retail programs and partners” and “institutional clients testing liquidity.” 

The FTX collapse has caused a fast and far-reaching contagion, affecting a number of companies in the space. Moreover, the event led to crypto prices plunging to record lows, further exacerbating the ongoing crypto meltdown that started with the fall of Terra’s algorithmic stablecoin UST.

As of now, Bitcoin is trading at $16,597, down by 76% compared to its all-time high of $69,044 recorded in November last year. The broader crypto market is also down badly this year amid all the turbulence.