- Gemini has been hit with a class action lawsuit over its suspended Gemini Earn program
- Two investors have claimed that Gemini should have registered its offering with regulators
- They also claim they were not made aware of the level of risk involved
Gemini and its founders, Tyler and Cameron Winklevoss, have been hit with a class action lawsuit over its interest-earning accounts. The suit alleges that Gemini failed to register its interest-bearing accounts as securities, with the investors accusing the company and its founders of fraud and violations of the Exchange Act. The lawsuit comes on the back of Gemini Earn halting withdrawals following the FTX-related shortfall of its funding partner Genesis Global Capital last month.
Gemini Earn Not Registered as Securities Instrument
Two investors, Brendan Picha and Max J. Hastings, are fronting the lawsuit which was filed in a Manhattan federal court and claims that the Gemini Trust Earn products, which promised returns of up to 8%, were not registered with the necessary regulatory bodies and therefore did not provide the required disclosures for investors to assess the risks involved.
When Genesis pulled up the drawbridge, this left Gemini Earn customers out in the dark too, with Gemini saying at the time that Genesis was “doing everything in their power to fulfill their obligations to customers under the Earn program.” It added that Genesis would “continue to work with them on behalf of all Earn customers”, adding that this was its “highest priority.”
Users Not Aware of Risks, Apparently
Picha and Hastings allege that Gemini’s refusal to honor any further investor redemptions resulted in the loss of all holdings in the program, risks they were not made aware of when they signed up.
In its latest update, Gemini said on December 23 that it was operating with the “utmost urgency” to resolve the liquidity issues with the Genesis Earn program and that it would “continue to work on your behalf around the clock through the holidays.” However, with no apparent progress on this front and now a class action lawsuit to face over the matter, the situation really doesn’t look good for the once high-riding Winklevii.