Following collapse of fraudulent crypto exchange FTX and few other crypto corporations such as Binance being in huge trouble, crypto exchange Gemini has now come into media’s limelight as it is being sued by investors over the sale of its interest-earning crypto products.
Media reports said, investors Brendan Picha and Max J. Hastings filed a class-action lawsuit on behalf of themselves and “others similarly situated” with the US Southern District Court of New York. They are seeking a trial by jury, according to the complaint.
Picha and Hastings say Gemini’s Earn program – which offered interest of up to 7.4 percent to customers for lending their crypto assets – didn’t register those assets as securities in accordance with US securities law. The filing says Gemini abruptly halted the program around Nov. 16 after crypto exchange FTX filed for bankruptcy and contagion from its fall caused a liquidity crisis at Genesis Trading, which functioned as Gemini’s borrower. Genesis is owned by Digital Currency Group.
“When Genesis encountered financial distress as a result of a series of collapses in the crypto market in 2022, including FTX Trading Ltd. (“FTX”), Genesis was unable to return the crypto assets it borrowed from Gemini Earn investors”, the filing said, adding that after the Gemini Earn program was halted, the company “refused to honor any further investor redemptions, effectively wiping out all investors who still had holdings in the program, including plaintiffs”.
Crypto firms that suffered financial distress following the market downturn and collapse of high-profile enterprises like FTX and Terraform Labs from earlier this year are now facing a barrage of lawsuits from investors attempting to recover their losses.
Here are several comments by various individuals on Gemini:
Robert: Wait, why in the world would you rush to an investment because it has “no regulations” and then try to go to court when that investment goes south. Now you want to impose regulations on the “no” regulation financial system. Can’t have it both ways!
Carl: I’ve always considered crypto currencies to be an elaborate Ponzi or Pyramid scheme. The early investors make the most money.
Michael: They didn’t care about US securities law as long as they were making money. They should have read the terms of service. It’s spelled out very clearly in bold letters as the first item listed under “Program Risks”. It says, “Your available digital assets will leave our custody, and you accept the risk of loss associated with loan transactions, up to, and including, total loss of your available digital assets”.
Donald: This goes back to before FTX and was nothing but a cycle of people not realizing that their security was being lent, and lent, and lent at ever increasing interest rates and basically when the dollars for the original assets stopped coming in and began going out the whole thing collapsed. It was no different than pledging one piece of real estate for several loans on other properties, then repeat and repeat. A great moneymaker and the debtor appear asset rich until it crashes. But did anyone really believe that getting appreciation plus subprime + interest was not too good to be true?
Joel: Crypto value is essentially based of the same group of people buying and selling to each other creating a bubble. The cycle kept growing due to low interest rates and expanding interest from new investors. With no new money coming and current investors all wanting out and trying to sell on any uptick in price, crypto is on a downward spiral. Some even want to sell now and plan on buying back in later.
Arnold: The crypto bubble has burst, and there are a lot of angry Crypto investors.
Jeremy: I am laughing at this. You people fell for one of the worst Ponzi schemes since Madoff. Oh my god. Your digital assets were not covered by FDIC or the federal government. Your assets are meaningless, because you all purchased a wooden nickel. And the banks and government doesn’t cover losses of wooden nickels.
Isaac: Crypto house of cards is falling.
Thomas: Crypto is a fraud from day one. The fake inventor named Satoshi Nakamoto should have been a big red flag for Wall Street. The total collapse of Crypto will occur in 2023.
Martin: I have always said Crypto is a Ponzi scam. And it appears that all the folks who run Crypto based businesses are scammers. Thank you, Tech industry, for allowing these crimes to happen.
Bernard: Looks like Gemini operated much like FTX. Lend depositors crypto to an affiliated trading firm and hope you get repaid with interest which worked at first until the bottom fell out of the crypto market. Loans essentially uncollateralized.
Jason: Gemini is another scam firm. When will our Government shut these Ponzi Schemes down?
Justin: Gemini is another FTX.
