Reports said that crypto lender Genesis and its parent company Digital Currency Group (DCG) allegedly owe $900 million to Gemini’s clients, citing people familiar with the matter.
It has been reported that the issue derives from the FTX dramatic collapse in November. Crypto exchange Gemini operates a product called Gemini Earn in partnership with Genesis, offering investors the opportunity to earn 8% in interest by lending out their crypto, including Bitcoin and stablecoins pegged to fiat currencies.
However, on November 16, Genesis announced it had temporarily suspended withdrawals citing “unprecedented market turmoil,” days after disclosing around $175 million worth of funds stuck in an FTX trading account. Genesis is reportedly facing difficulties raising money for its lending unit but refuted speculation of its “imminent” bankruptcy.
The report said that November 16, Gemini Earn started experiencing issues with deposits, according to the exchange status page. The product remains unavailable, as of December 3, while all other Gemini services, including the exchange trading engine and the Gemini Credit Card, remain available.
Likewise, Gemini has formed a creditor’s committee and is working to recoup the funds from Genesis and DCG, noted the report. In an effort to restore clients’ trust amid fears of contagious spread following FTX’s fall, Gemini announced on November 29 its Trust Center, a dashboard showing metrics for funds held by Gemini and on the exchange’s behalf.
The firm said that Gemini’s Earn program was launched in 2021 in the United States. As of November 2022, it operates in more than 65 countries, including new jurisdictions like Croatia, Cyprus, Czech Republic, Denmark, Hungary, Ireland, Latvia, Liechtenstein, Portugal, Romania, Slovenia, Sweden and others.
Thus, the exchange was hit by the ongoing crypto bear market, cutting up to 20% of its staff this year.