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Winklevoss Crypto Firm Gemini to Return $1.1B to Customers in Failed "Earn" Scheme

‘Earn’ product fiasco

Gemini to return money

As part of a settlement with regulators on Wednesday, the cryptocurrency company Gemini, owned by the Winklevoss twins, agreed to repay at least $1.1 billion to consumers of its failed "Earn" loan scheme and pay a $37 million fine for "significant" compliance violations.

The New York State Department of Financial Services claims that Gemini, which the twins started following their well-known argument with Mark Zuckerberg over who developed Facebook, neglected to "fully vet or sufficiently monitor" Genesis, Gemini Earn's now-bankrupt lending partner.

What is the Earn Program?

The Earn program, which promised users up to 8% income on their cryptocurrency deposits, was canceled in November 2022 when Genesis was unable to pay withdrawals due to the fall of infamous scammer Sam Bankman-Fried's FTX enterprise.

Since then, almost 30,000 residents of New York and over 200,000 other Earn users have lost access to their money.

Gemini "engaged in unsafe and unsound practices that ultimately threatened the financial health of the company," according to the state regulator.

NYSDFS Superintendent Adrienne Harris claimed in a statement that "Gemini failed to conduct due diligence on an unregulated third party, later accused of massive fraud, harming Earn customers who were suddenly unable to access their assets after Genesis Global Capital experienced a financial meltdown." 

Customers win lawsuit

Customers of Earn, who are entitled to the assets they committed to Gemini, have won with today's settlement.

“Collecting hundreds of millions of dollars in fees from Gemini customers that otherwise could have gone to Gemini, substantially weakening Gemini’s financial condition,” was the unregulated affiliate that dubbed Gemini Liquidity during the crisis.

Although it did not provide any details, the regulator added that it "further identified various management and compliance deficiencies."

Gemini also consented to pay $40 million to Genesis' bankruptcy proceedings as part of the settlement, for the benefit of Earn customers.

"If the company does not fulfill its obligation to return at least $1.1 billion to Earn customers after the resolution of the [Genesis] bankruptcy," the NYSDFS stated that it "has the right to bring further action against Gemini."

Gemini announced that the settlement would "result in all Earn users receiving 100% of their digital assets back in kind" during the following 12 months in a long statement that was posted on X.

The business further stated that final documentation is required for the settlement and that it may take up to two months for the bankruptcy court to approve it.

The New York Department of Financial Services (DFS) was credited by Gemini with helping to reach a settlement that gives Earn users a coin-for-coin recovery.

More about the lawsuit

Attorney General Letitia James of New York filed a lawsuit against Genesis and Gemini in October, accusing them of defrauding Earn consumers out of their money and labeling them as "bad actors."

James tripled the purported scope of the lawsuit earlier this month. The complaint was submitted a few weeks after The Post revealed that, on August 9, 2022, well in advance of Genesis's bankruptcy, Gemini had surreptitiously taken $282 million in cryptocurrency from the company.

Subsequently, the twins stated that the change was made to the advantage of the patrons.

The brothers' actions, however, infuriated Earn customers, with one disgruntled investor telling The Post that "there's no good way that Gemini can spin this."

In a different lawsuit, the SEC is suing Gemini and Genesis because the Earn program was an unregistered security.

The collapse of Earn was a significant blow to the Winklevoss twins' hopes of becoming a dominant force in the industry.

Gemini had built its brand on the idea that it was a reliable player in the wild, mostly uncontrolled cryptocurrency market.

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United States
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Crypto Firm Terraform Labs Files for Chapter 11 Bankruptcy in US

 

Following the 2022 collapse of its cryptocurrencies, Singapore-based Terraform Labs (TFL), the firm behind digital assets TerraUSD (UST) and Luna, filed for Chapter 11 bankruptcy in Delaware. 

The Chapter 11 bankruptcy protection petition was confirmed by Terraform Labs, which noted it as a strategic move that will allow it to sustain its operations and support litigation ongoing in Singapore and U.S. litigation involving the Securities and Exchange Commission. The group stated it wouldn't need more funding in order to "meet all financial obligations to employees and vendors during the Chapter 11 case.”

In a court filing earlier this week, Terraform Labs' estimated assets and liabilities are between $100 million and $500 million, with between 100 and 199 creditors. 

Terraform Labs stated that it intends to keep growing its web3 business. The startup launched Station v3, a cryptocurrency wallet, earlier this month and just acquired Pulsar Finance, a cross-chain portfolio manager and data vendor. 

“The Terra community and ecosystem have shown unprecedented resilience in the face of adversity, and this action is necessary to allow us to continue working toward our collective goals while resolving the legal challenges that remain outstanding,” stated Chris Amani, CEO of Terraform Labs.

Founded in 2018, Terraform Labs collapsed the cryptocurrency market in May 2022, wiping out at least $40 billion in market value. The announcement of bankruptcy was made four days after the U.S. SEC decided to move the civil trial against Do Kwon, a co-founder of Terraform Labs, and the company for an alleged $40 billion cryptocurrency scam from January 29 to March 25. 

Kwon is being held in detention in Montenegro for leaving the nation in March using forged travel documents. The co-founder of Terraform Labs could be extradited to the United States or South Korea in March following the extradition decision, which is entirely up to the justice minister of Montenegro. 

Last year in February, the U.S. SEC charged Kwon and Terraform Labs with scamming the U.S. investors who purchased the digital assets Terra USD and Luna. As per the court petition, Kwon holds a 92% ownership in Terraform Labs, while Daniel Shin, another co-founder of the company, holds an 8% investment in TFL.
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WeWork
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From Boom to Bust: WeWork's Bankruptcy Filing Sends Shockwaves

 


According to authorities, WeWork filed for Chapter 11 bankruptcy protection in the federal court of New Jersey on Monday, reporting that it had entered into agreements with more than 80% of its secured noteholders and that it intends to trim leases which do not serve its objectives. 

WeWork said in a press release that the bankruptcy filing is valid only for its locations in the U.S. and Canada and it has no effect on its international operations. A preliminary filing of WeWork found that the company owed $18.65 billion in debt, with assets valued at $15.06 billion. 

According to the filing, WeWork, an office space provider that serves co-working spaces across the United States and Canada, has filed for bankruptcy to cover the liabilities it has incurred from more than $10 billion to over $50 billion. Earlier this year, the company was valued at $47 billion, and later the same year, it unsuccessfully attempted to go public after being valued at $47 billion in January 2019. 

Investors were unimpressed when they discovered that the company was losing a significant amount of its market value due to the decision of its founder and CEO, Adam Neumann. Its downward spiral was eventually reported in both WeWork: Or the Making and Breaking of a $47 Billion Unicorn, a documentary to be released on Hulu, and in WeCrashed, an Apple TV podcast that has developed into a TV show. 

Those who are affected by the bankruptcy primarily work in the US and Canada, and feel the impact mainly on their businesses. The company has confirmed, however, that its coworking spaces, including those in the UK, continue to be operational despite the project's closure. 

This assurance notwithstanding, according to reports, despite the company's efforts to reorganize its finances, the company has reportedly started closing an office along London's South Bank, as part of a reorganization program. 

In June, WeWork had approximately 730,000 members in over 700 global locations and more than 700 locations worldwide. However, even though the company has a wide network of business contacts, its financial health has deteriorated as it has significant liabilities on its balance sheet that need to be repaid. 

Recently, Co-Founder Adam Neumann expressed his dismay over the trajectory of the company since he stepped down from the company in 2019, in a statement released on Twitter. With Adam Neumann at the helm since 2010, WeWork grew into a brand synonymous with a contemporary, communal working environment, including amenities such as complimentary refreshments, a vibrant look, and a modern architectural feel. 

After a failed attempt at a public listing in 2019, the brand's allure suffered a blow to its appeal, which eventually led to Adam Neumann stepping down from the company. During the Pandemic of 2009, remote work became increasingly popular worldwide, resulting in a shift in the industry towards remote work that exacerbated WeWork's difficulties. 

During the first half of the year, WeWork lost over £800 million. To cope with the financial woes of WeWork, the company has been actively divesting parts of its operations as well as seeking to restructure leases and debts in response to its financial woes. 

There has been extensive media coverage of the company's substantial deficits, internal transactions, and blown-up representations in Apple TV's dramatised portrayal, "WeCrashed," which is based on this fictional account. The firm stated in its latest announcement that WeWork plans to further rationalize the company's commercial office lease portfolio as it aims to improve the member experience while ensuring business continuity. 

WeWork's global operations are expected to continue as planned, according to the firm. The company, which has recently filed for protection under Chapter 11 of the US Bankruptcy Code, wants to emphasize that WeWork's locations outside of the U.S. and Canada are not included in this process. 

It is important to note that WeWork's franchisees around the world are similarly not affected by these ongoing proceedings. Hinting at previous poor decisions, the newly appointed CEO, David Tolley, expressed his belief that it is now the opportune time for the company to proactively bring the future closer by taking aggressive measures to address its legacy leases and significantly improve its balance sheet. 

Despite the challenges faced, it is reassuring to know that the office spaces remain open and operational, ensuring minimal disruptions for customers. However, the future trajectory of WeWork remains uncertain, and it is interesting to speculate on how the company's office space portfolio might evolve in the coming months.
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US SEC
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Crypto Withdrawals of $8bn Hit Silvergate, a US bank

 


Silvergate, the US bank that offers cryptocurrency services, has reported that its clients have withdrawn over $8 billion (£6.7 billion) of their cryptocurrency-linked deposits over the past several weeks. 

In the final three months of 2022, roughly one-third of the bank's customers pulled their deposits from the bank. The bank sold assets worth $5.2 billion to cover the cost and maintain liquidity. 

According to three US regulators, issuance or holding crypto would conflict with safe and sound banking practices as it would be "highly likely that such practices would be compromised." 

Listed on the New York Stock Exchange, Silvergate is a bank regulated by the New York Stock Exchange and a part of the financial sector. A few businesses within this sector offer cryptocurrency services, and this business is one of the very few. Before the November bankruptcy filing of FTX, the crypto exchange was once valued at $32 billion. Withdrawals followed the collapse of the FTX exchange. 

A former FTX boss has pleaded not guilty to charges that he defrauded customers and investors as part of his role at the company. Approximately one million credits may have been affected by bankruptcy, according to prosecutors. 

Cryptocurrencies have been affected by the case, leading to bankruptcy filings at other companies and the price of crypto falling. 

Silvergate's chief executive officer, Alan Lane, said the bank had sold assets to cover customer withdrawals to compensate for the trading risks associated with digital assets "in response to increasing changes in the digital asset market." It seems that Silvergate has also fallen victim to the chilling "crypto winter" that has been devouring the cryptocurrency industry since last spring. 

As the name implies, the so-called crypto bank fills an unusual position in the market, serving as a bank for cryptocurrency companies that had difficulty finding banking services that could be offered by traditional banks. 

An Alameda Research company, which is now bankrupt, is owned by Sam Bankman-Fried. He is suspected of fraud and is awaiting trial in the United States. There is no doubt that Bankman-Fried's downfall has been a blow for Silvergate, but the risk of market confidence has been a more risky blow to the company. In the aftermath of Bankman-Fried's collapse, several small and large investors have pulled their money out of crypto companies, transferring billions of dollars from crypto accounts stored by companies. 

Binance and Coinbase have so far survived the unprecedented withdrawals of users and have become some of the biggest names in the industry. While it seems that Silvergate is also weathering the storm, its balance sheet is taking a heavy hit as a direct result of the storm. 

Before entering the world of cryptocurrency, in November 2019, Silvergate was a small US bank that had recently been made public. The shares of the company had grown by more than 1,500% by the time the market reached its climax in 2021. This was mainly due to the massive growth of crypto during this period. There was a period during which it attempted to launch its stablecoin. During this period, it tried to create a cryptocurrency directly tied to an asset such as gold, the US dollar, or another cryptocurrency. 

Additionally, Silvergate spent $182 million in January 2022 to acquire the technology used in Meta's proposed Diem (formerly Libra) stablecoin, which is yet to hit the market. According to a filing filed with the US Securities and Exchange Commission (SEC), the bank said it had sold the debt to cover withdrawals from its accounts. It said that the purchase of the diem is no longer classified as an asset, indicating that the purchase has been written off. The bank has also deducted its workforce by 40% - about 200 people. Since 2013, withdrawals have cost the company $718m in losses, an amount greater than its profit.   
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Technology
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FTX: Failed Crypto Exchange Could Owe More Than 1 Million Creditors


Following the collapse of the crypto exchange FTX, and its associated businesses, it could owe money to more than a million people and organizations, according to the bankruptcy filings. The documents filed in bankruptcy court demonstrated the extent of a corporate collapse that has stripped traders’ accounts, plunging the crypto sector into crises. 

The investigations for bankruptcy commenced last week when FTX experienced an $8 billion shortfall due to a run-on deposit. Consequently, this led to the company which was once regarded as one of the safest and most reliable institutions of the freewheeling crypto industry crumbling overnight. 

The exchange’s founder Sam Bankman-Fried reportedly transferred $10 billion of customer funds from FTX to his trading company ‘Alameda Research.’ A large amount of that total fund has since disappeared. The total amount is said to be between $1-2 billion. 

The financial hole later came to light in records shared by Bankman-Fried with other senior executives last Sunday. The records provided a real-time account of the situation, some sources said. 

The company’s sudden downfall due to the run-on deposits last week left FTX unable to fulfill its customers' demands. Consequently, Bankman-Fried struck a rescue deal to sell his firm to its largest rival exchange, Binance. 

After a lengthy online skirmish between Bankman-Fried and Changpeng Zhao, CEO of Binance, a review stating FTX’s finances revealed various problems, posing as a deal breaker and Binance pulled out of the deal. Bankman-Fried attempted to secure new financing but was unable to, and later declared bankruptcy. The Justice Department and SEC are currently looking into his management of FTX. They are apparently focusing on whether FTX inappropriately transferred customer funds to Alameda Research.  

In regards to the case, Associate Professor in Finance Technology at the University of Liverpool, Gavin Brown referred to a recent report that suggested “42% of the exchanges which failed simply disappeared without traces.” 

According to Prof Brown “In the event of exchange failure, or even bankruptcy, it is the investors who are on the hook for losses” He, along with other industry experts warned that often smaller investors often end up back of the queue, after the remains of a crypto business are divided among themselves. They doubt much money will be coming back. 

"The unfortunate news is that the money's all gone. It's just not there anymore. Investors should expect pennies on the dollar," says crypto blogger and author David Gerard.   

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FTX
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FTX Filed for Bankruptcy Protection in US

Facing the digital equivalent of a banking collapse, the financially troubled cryptocurrency exchange FTX filed for US bankruptcy protection on Friday.

Bitcoin fell to a two-year low this week after a week of reports regarding the platform's financial difficulties, and by Friday night, the price of the cryptocurrency was trading at $16,861 (€16,256).

The company revealed that Sam Bankman-Fried, its former CEO, has also left after a remarkable turn of events at the second-largest cryptocurrency exchange in the world. His FTX empire crumbled in a little more than a week, shattering trust in the already unstable cryptocurrency market.

Coindesk and customer reports on social media claim that the unstable platform has finally permitted some users to withdraw money for the first time in days.

Summary of FXT company

According to a tweet from the company, FTX, Alameda Research, a cryptocurrency trading company that is linked with it, and roughly 130 of its other businesses have started voluntary Chapter 11 bankruptcy procedures in Delaware. In the US, a firm can use Chapter 11 to reorganize its debts while still operating under court supervision.

FTX Trading claimed in its bankruptcy filing that the firm has assets worth between $10 billion and $50 billion, liabilities between $10 billion and $50 billion, and more than 100,000 creditors.

Customers left FTX earlier this week because of concern about a lack of capital, leading to an agreement to sell the company to larger rival Binance.

Kingston student Thomas, 22, who has been a customer of FTX for over a year, calls it a 'hub for crypto.'For the £2,000 he claimed to have on the exchange, which he calls a 'fairly large amount of money,' he claims he was able to submit a withdrawal request.

However, he is worried about the number of requests being made by FTX consumers and is unsure if all of them will be fulfilled as the business struggles.

The cryptocurrency community had hoped that Binance, the biggest cryptocurrency exchange in the world, could be able to save FTX and its depositors.

After reviewing FTX's financial records, Binance came to the conclusion that the issues facing the smaller exchange were insurmountable, and it withdrew from the agreement. A business that was once the pride of the cryptocurrency market had a dramatic fall in popularity.

In January, FTX collected $400 million from investors, valuing the business at $32 billion.






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Cyber Attacks
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Bitcoin Exchange Files for Bankruptcy After Being Hacked Again

Earlier this week, a major South Korean bitcoin exchange, Youbit, was hacked for the second time in less than 8 months. It has since filed for bankruptcy after releasing that the hackers had stolen 17% of its digital currency reserves.

The exchange trades ten virtual currencies, including bitcoin and ethereum.

Youbit says that the hackers had attacked its “hot-wallet”, which is an account kept online for holding crypto assets, and that its offline, cold-storage holdings are safe and still accessible, adding that all customers will be able to withdraw 75% of their assets once the bankruptcy proceedings are settled.

Allegedly, this attack is an addition to the series of cyberattacks in South Korea, all credited to North Korean hackers targeting the growing market of cryptocurrencies in South Korea.

This hack accentuates the growing concern in the market for the safety of digital currency and holdings.

While with traditional banking, people feel safe with their finances and there is less risk for the customers, cryptocurrencies are highly risky and are increasingly targeted by hackers.
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