Singapore and global users of Gemini’s lending scheme will get back crypto valued at $2.9b

SINGAPORE - Customers in Singapore and elsewhere who had their assets stuck in American cryptocurrency exchange Gemini’s lending programme will get back digital tokens owed to them from the night of May 29.

In Singapore, all 16,554 Gemini Earn accounts will receive their tokens, which have been valued at around $182 million based on digital asset prices as at May 28, 2024, at 10pm.

In total, 232,000 Earn users are to receive a projected US$2.18 billion (S$2.9 billion) of their digital assets in kind, Gemini said in a statement.

It said that if a customer lent one bitcoin, he or she will receive one bitcoin back. This means that customers stand to gain from any and all appreciation of their digital assets since they lent them, given that the market has picked up in recent months.

In November 2022, when the crypto market slumped after the

implosion of American exchange FTX,

whose founder Sam Bankman-Fried is behind bars for fraud and other criminal charges, the price of Bitcoin hovered around US$17,600.

The price of Bitcoin at the time of writing was US$68,000.

Gemini said about 97 per cent of digital assets in the programme would be returned. The remaining assets are expected to be returned to Earn customers within the next 12 months.

“This represents an unprecedented recovery among crypto bankruptcies, as well as bankruptcies in general, and follows Gemini’s previous announcement that it had reached a settlement in principle with Genesis and other creditors in the Genesis bankruptcy, which will result in all Earn users receiving 100 per cent of their digital assets back in kind,” the firm said.

The Earn programme was an optional crypto lending scheme where the exchange’s customers could lend assets to a third-party crypto borrower Genesis Global. It was offered in Singapore, Hong Kong and the US.

Genesis, whose parent company Digital Currency Group (DCG) was reported by The Straits Times in 2023 to be backed by Singapore sovereign wealth fund GIC,

halted redemptions in November 2022,

days after the surprise collapse of FTX.

The fall of FTX led to the bankruptcy of Genesis Global and seriously hurt Gemini in the process.

Genesis Global was Gemini’s sole partner on the Earn product.

When Genesis froze withdrawals in November 2022, the move forced Gemini to pause redemptions on the Earn accounts. 

About 232,000 Earn users then lost access to the digital assets they had lent to Genesis.

At the time, the customers’ digital assets were worth roughly US$940 million and the limbo sparked a heated public exchange between the Winklevoss twins – Tyler and Cameron – who are co-founders of Gemini, and Mr Barry Silbert, chief executive officer of DCG.

Genesis then

filed for bankruptcy in January 2023.

The latest development comes 15 months after venture capital firm DCG, crypto lender Genesis Global Capital, the exchange and other creditors in February 2023

said they reached a tentative in-principle settlement agreement.

Gemini said it contributed US$50 million to the Earn users’ recovery in order to ensure a successful outcome.

“It’s important to note that the Genesis bankruptcy was not a crypto problem,” said Gemini’s co-founder and chief executive Tyler Winklevoss.

“It was old-fashioned financial fraud compounded by a lack of regulatory clarity.

“To that end, we will continue to fight for clear rules and guidance for our industry that foster both innovation and consumer protection,” he added.

Founded in 2014, Gemini has a presence in about 70 countries and counts Singapore as the second-largest market after the US in number of customers.

The firm’s Singapore arm – Gemini Trust Company – is operating under exemption here and is in the midst of applying for a licence in Singapore.

The Winklevoss twins

in June 2023 told ST

that they were looking to grow their business in Singapore as part of a strategy to diversify outside the US, where the authorities were cracking down on the sector.

Separately, Genesis previously attributed its woes to the collapse of now-bankrupt crypto hedge fund Three Arrows Capital (3AC) and FTX.

In December 2023, 3AC’s liquidator said about US$1 billion in assets belonging to the firm’s founders

were frozen by a British Virgin Islands court.

The hedge fund had earlier operated out of Singapore and later filed for bankruptcy in the British Virgin Islands.

In September 2023, the two Singapore citizen co-founders of 3AC, Zhu Su and Kyle Davies,

were banned for nine years by Singapore’s regulator

from taking part in regulated capital market services in the Republic.

Zhu was

arrested at Changi Airport in September 2023

for breaching a court order. He was released from prison in December 2023.