The Winklevoss twins and their embattled cryptocurrency site Gemini were faced with a possible class-action lawsuit this week from two disgruntled investors accusing them of fraud and other wrongdoing.
The complaint, filed by investors Brendan Picha and Max J. Hastings, alleges that Cameron and Tyler Winklevoss sold interest-bearing accounts at Gemini without registering them as securities and without fully alerting customers to the potential risks.
Gemini is scrambling to recoup $900 million in customer funds held by its lending partner in interest-bearing accounts Genesis, which it said was due to what it described as “unprecedented market turmoil” surrounding the collapse of FTX, with a liquidity crisis was faced.
According to the lawsuit filed Tuesday, Gemini “refused to honor further investor redemptions, effectively wiping out any investors who still had interests in the program.”
The Winklevoss twins founded Gemini in 2014. The pair became crypto kingpins after becoming well known for their Facebook legal battle with former Harvard classmate Mark Zuckerberg.
Cameron and Tyler Winklevoss are best known for their legal battle with Mark Zuckerberg. Bloomberg via Getty Images
The “Gemini Earn” program billed itself as a way for clients to earn interest on their digital currency holdings. The Winklevoss twins’ platform said participants could earn up to 8% in annual interest.
When Genesis faced potential bankruptcy last month, Gemini was forced to halt payouts to Earn accounts.
Picha and Hastings, who are seeking class action status on behalf of other Gemini customers affected by the situation, accused the twins of infusing the interest-bearing accounts “with repeated false and misleading statements, including the [accounts] were a surefire way to collect interest.”
Gemini implemented layoffs over the summer as crypto prices plummeted. Bloomberg via Getty Images
Plaintiffs allege that had Gemini marketed them as securities, customers would have been privy to “necessary and reasonable disclosures” about the potential risks of the program.
Aside from fraud, the lawsuit accused the Winklevoss twins of violating the Stock Exchange Act.
Gemini’s Customer Service Agreement states that all disputes about accounts will be resolved through arbitration. According to Bloomberg, a number of customers have already filed claims for arbitration.
The agreement also notes that the offers carried risks, including a potential “total loss” of the customer’s investment.
The Post has reached out to Gemini for comment on the lawsuit.
Gemini has posted regular updates on the status of its Earn accounts on its website – the latest of which was released on Tuesday.
“We continued to work on a solution during the Christmas holidays. We expect a more comprehensive update by the end of this week,” the update reads.