Crypto exchange Gemini is reportedly being hit with a class action lawsuit along with its founders for allegedly selling unregistered securities.
According to a new report from Bloomberg, Gemini, along with its founders, the Winklevoss brothers, are the target of a lawsuit claiming they sold interest-bearing accounts through the firm’s Earn program as unregistered securities.
Under the Earn program, Gemini partnered up with crypto lender Genesis to provide traders with up to 8% returns on their holdings. However, earlier this month Genesis announced that FTX’s collapse greatly affected its finances and it could longer pay out investors of Gemini’s Earn program.
Currently, Genesis owes Gemini about $900,000,000.
Gemini “refused to honor any further investor redemptions, effectively wiping out all investors who still had holdings in the program,” according to the report.
The plaintiffs say had the Earn products been properly registered, they would have gotten disclosures that would have let them accurately evaluate the risks associated with them.
The customers argue they were misled to believe that the Earn products were safe and that even though Gemini’s agreements state that Earn products are uninsured and risky, those terms were minimized during the firm’s marketing campaign.
In a statement to Forbes, Gemini said it is “committed to providing a secure and compliant platform for our customers” and will be “vigorously defending itself against these baseless allegations”.
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