Crypto Crisis Spreads to Winklevoss Twins’ Gemini Earn

The overall Gemini exchange remains operational, and customers outside its rewards program can still withdraw assets.

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The liquidity crisis among major cryptocurrency players continued to spread Wednesday as the Gemini exchange told customers that they may be unable to withdraw assets from a program that pays rewards on deposited cryptocurrency.

The development directly affects only users of the Gemini Earn program, which pays rewards upward of 8% to customers who lend out certain cryptocurrencies. Assets in that program are supposed to be available within five business days of customer request.

Users must opt in to the program, so if you’re a Gemini customer but haven’t moved your crypto into Gemini Earn, you can likely still access your crypto. Gemini, co-founded by twins Cameron and Tyler Winklevoss, emphasized that other assets held on its platform remain available for withdrawal.

What happened to Gemini Earn?

The Gemini Earn issue, the company said, is with third-party lending partner Genesis Global Capital, which paused withdrawals this week citing “abnormal” volumes of redemption requests after the collapse of the FTX exchange.

FTX and its U.S. branch, FTX.US, announced Friday that they filed for Chapter 11 bankruptcy after a spike in withdrawals amid reports that the company had used customer funds on risky investments that left it in a deep financial hole.

The announcement by Gemini underscores how widespread the fallout of the FTX turmoil has become. Based in the U.S., Gemini has presented itself as a reliable, well-regulated alternative in the free-wheeling world of cryptocurrency.

On Friday, the Winklevoss twins wrote a letter to customers arguing that they had no direct exposure to FTX and that the company had a 1-to-1 reserve backing customer deposits.

“From day one, Gemini has prioritized the security of our customers’ assets. We never have and never will compromise on that point,” the letter said.

Nonetheless, the pause in withdrawals is an example of how the recent chaos is challenging the preparedness of Gemini and others.

On the homepage for Gemini’s Earn product, the company has said its rewards are generated through partnerships “with accredited third-party borrowers like Genesis, who are vetted through a risk management framework that reviews our partners’ collateralization management process.”

On Wednesday, Genesis acknowledged that it has been trying to shore up its books for months and is “working tirelessly” to figure out how to preserve customers assets, “including among other things, sourcing new liquidity.”

» Learn more: What to do if your crypto exchange fails

What comes next?

If your funds are on Gemini Earn, the situation remains unsettled. Neither Gemini nor Genesis has given detailed descriptions of the process going forward.

“We are working with the Genesis team to help customers redeem their funds from the Earn program as quickly as possible. We will provide more information in the coming days,” the company said.

One step customers can take is to keep detailed records of how much crypto they have, what it's worth and exactly where it's being held. This information can be useful in working out potential disputes.

» Moving your crypto? Check out NerdWallet's top crypto wallets

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