Crypto lender Genesis and its parent company Digital Currency Group (DCG) allegedly owe Gemini customers $900 million, according to a Financial Times report published Dec. 3, citing people familiar with the matter.
The problem stems from the dramatic collapse of the FTX in November. Crypto exchange Gemini, in partnership with Genesis, operates a product called Gemini Earn, which offers investors the opportunity to earn 8% interest by lending their crypto, including bitcoin and stablecoins pegged to fiat currencies.
On Nov. 16, Genesis announced that it had temporarily suspended payouts citing “unprecedented market turmoil,” days after it disclosed approximately $175 million worth of funds held in an FTX trading account. Genesis is reportedly struggling to raise money for its lending unit, but denied speculation about its “impending” bankruptcy.
Also on November 16, Gemini Earn was experiencing deposit issues, according to the exchange status page. The product is not available at the time of writing while all other Gemini services including the stock trading engine and Gemini credit card are still available.
Gemini has formed a creditors’ committee and is working to recover funds from Genesis and DCG, the report said. To restore customer confidence amid fears of a contagious spread following FTX’s fall, Gemini announced its Trust Center on Nov. 29, a dashboard that displays metrics for funds held by Gemini and on behalf of the exchange.
However, in the Twitter thread about the Trust Center, Earn program customers said they would regain their trust once payout proceeds resumed.
Gemini will not be trusted by anyone if the EARN situation is not resolved for your customers. Don’t create and market a product that poses an absurd risk to your customers’ funds. It is unethical for Gemini to charge fees but not accept responsibility. Not taking good care of your customers.
— Clint (@Az78Clint) November 30, 2022
Gemini’s Earn program launched in the United States in 2021. As of November 2022, it operates in more than 65 countries, including new jurisdictions such as Croatia, Cyprus, Czech Republic, Denmark, Hungary, Ireland, Latvia, Liechtenstein, Portugal, Romania, Slovenia, Sweden and others, the company said. The exchange has been hit by the ongoing crypto bear market, which has shed up to 20% of its staff this year.
Gemini and Genesis did not immediately respond to Cointelegraphs requests for comment.