Gemini, a prominent cryptocurrency exchange, has agreed to reimburse at least $1.1 billion to customers of its defunct lending program. The company will also pay a $37 million fine as part of a settlement with the New York Department of Financial Services (NYDFS).

What Happened: The settlement, announced on Wednesday, is a result of the NYDFS’s investigation into Gemini’s Earn program, which was operated in partnership with crypto lender Genesis Global Capital. The program was terminated during a crypto market crash in November 2022, leading to Genesis filing for bankruptcy, Reuters reported.

The NYDFS can take further action against Gemini if the company fails to fulfill its commitment to return the funds to customers after the resolution of Genesis’ bankruptcy. Gemini has also pledged $40 million to aid in the conclusion of Genesis’ bankruptcy, as per the regulator’s statement.

Why It Matters: The settlement is a significant step towards returning funds to Gemini’s Earn customers, who have been unable to access their accounts since late 2022. The NYDFS has been critical of Gemini’s failure to monitor and conduct due diligence on Genesis during the Earn program’s tenure.

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Notably, Gemini is led by the Winklevoss twins, who have been embroiled in a legal battle with Meta Platforms CEO Mark Zuckerberg. The company had previously sued Digital Currency Group (DCG) over the collapse of their joint crypto lending partnership.

Adrienne Harris, the Superintendent of NYDFS, stated that Gemini’s failure to conduct due diligence on an unregulated third party, later accused of massive fraud, harmed Earn customers. The settlement is a win for Earn customers, who have a right to the assets they entrusted to Gemini.

In a blog post, Gemini expressed gratitude to the NYDFS for its role in the settlement, which delivers a coin-for-coin recovery for Earn users.

What’s Next: The settlement comes after a series of legal battles involving Gemini, Genesis, and DCG. In October, Gemini initiated legal action against the now-insolvent Genesis over the rightful ownership of Grayscale Bitcoin Trust shares, valued at nearly $1.6 billion. This move was made just weeks ahead of Benzinga’s Future of Digital Assets conference, which sought a judicial declaration.

Earlier in the same month, New York Attorney General Letitia James filed a lawsuit against Gemini, Genesis, and DCG for defrauding investors of more than $1 billion. The lawsuit sought to ban the companies from the financial investment industry in New York and demanded restitution for investors and disgorgement of ill-gotten gains.

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