Genesis Owes Gemini Earn Users $900M: Report

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Embattled crypto broker Genesis and its parent company Digital Currency Group (DCG) owe users of Gemini Earn $900 million, the Financial Times reported on Saturday, citing anonymous sources.

Gemini had used Genesis as its primary lending partner for its high-yield Earn service, which allowed customers to deposit their cryptocurrency in exchange for interest, similar to a bank account, offering returns of between 0.45% and 8% depending on which token you deposited.

According to the FT, Gemini is working as part of a creditors’ committee to regain the funds from Genesis and DCG.

The Gemini Earn service has experienced severe disruption since the FTX contagion began at the start of last month.

Gemini, which Cameron and Tyler Winklevoss founded in 2015, told users it would be pausing withdrawals from Gemini Earn on November 16, and has yet to provide any clarity as to when they are expected to be reopened. The exchange attributed the move to “unprecedented market turmoil”.

The move came directly after Genesis suspended redemptions for customers and new loans due to “abnormal withdrawal requests” following the FTX collapse on the same day.

Genesis is now reportedly working with investment bank Moelis & Co about potential financing options according to the newspaper, and it was reported earlier this month that the lender attempted to raise $1 billion as part of attempts to avoid the “liquidity crunch” which forced it to stop withdrawals.

Genesis had exposure to FTX of at least $175 million, coming via its derivatives trading business.

As part of our goal in providing transparency around this week’s market events, the Genesis derivatives business currently has ~$175M in locked funds in our FTX trading account. This does not impact our market-making activities.

— Genesis (@GenesisTrading) November 10, 2022

In addition, the complex financial relationship between Gemini and its parent company may be muddying the already worrying outlook for its creditors.

The newspaper reported that as of the time of writing, DCG, which also owns prominent crypto-focused investment house Greyscale Capital, owes Genesis $1.7 billion out of its total outstanding debts of $2 billion.

All other Gemini services, including its exchange, Gemini credit card, and Gemini Staking remain fully functional and working as normal as of the time of writing.

The exchange has repeatedly assured users that all the funds held in its exchange are backed 1:1.

Decrypt has contacted both Gemini and Genesis for comment on the story.