A class action lawsuit has been filed against Gemini Trust Co. and its two founders, twins Cameron and Tyler Winklevoss.
According to the lawsuit, interest-bearing accounts were sold by the crypto exchange without getting them registered as securities.
On Tuesday, a class action lawsuit was filed by investors in the US District Court for New York’s Southern District in which they have accused the company and its founders of violating the Exchange Act and committing fraud.
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The two brothers founded Gemini back in 2015 and its high-yield earn program was known as Gemini Earn.
The program was designed to work in the same way as a bank account, with the only difference being that customers deposited their cryptocurrencies in order to earn interest on them.
The program offered returns of somewhere between 0.45% and 8% on the digital asset holdings deposited by customers, depending on which crypto was deposited.
Last month, Gemini suspended withdrawals from the Gemini Earn program rather abruptly. This was after a key partner of the crypto exchange, Genesis Global had reported a liquidity crisis.
This was brought on by the contagion in the crypto market that was sparked by the implosion of the FTX crypto exchange, Alameda Research, and a number of other crypto entities.
Earlier this month, reports disclosed that the total amount that is owed by Genesis as well as its parent firm Digital Currency Group (DCG) to users of Gemini Earn stands at around $900 million.
The investors stated in their complaint that the crypto exchange is refusing to honor any more redemptions, which means losses for all investors who still had their crypto holdings in the program.
The plaintiffs also complained that if the company had bothered to register the Gemini Earn product, then disclosures would have been made to the investors.
This would have given them a better idea of the associated risks and enabled them to make better decisions.
Gemini to respond
Earlier this month, Gemini, which is based in New York, had sought the services of Houlihan Lokey, the financial services company, which functions as the creditor committee’s financial advisor.
The company took this action in order to deal with the liquidity crisis that DCG and Genesis are facing and to figure out a path for recovering the assets.
Last week, Gemini posted on its website that it was working with DCG and Genesis as quickly as possible and everyone was committed to cooperating.
On Tuesday, another update had been given by Gemini in which it said that the company had been working during the holidays to come up with a resolution.
Gemini also added that they would be able to provide a clearer update about the matter later in the week.
However, it appears that investors are not interested in waiting anymore for the company to take some action and have decided to file a lawsuit against the crypto exchange in order to get their funds back.