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Customers of the Gemini exchange who have deposits in its Gemini Earn program remain unable to withdraw their assets, as the liquidity crisis among major players continues in the wake of the FTX crash.
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 to do if you have money on Gemini Earn
If you do have funds on Gemini Earn, you may be waiting awhile to figure out whether you'll get your money back.
One step customers can take right away is to put together 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 picks for the top crypto wallets
In the meantime, the exchange says it will be updating customers about its progress negotiating with Genesis Global Capital, a third-party lender that had been working with Gemini before it paused withdrawals in November.
Gemini said it has formed a committee of creditors "to coordinate efforts and advocate together."
"Returning your funds is our highest priority and we are operating with the utmost urgency," the company said on its website.
Gemini says it is working with Houlihan Lokey, an investment bank, to advise it during discussions with Gemini.
On Dec. 17, 2022, Gemini said its work to "provide a path for the recovery of funds ... is still early stages, and discussions are ongoing, however, we'll update you as soon as more information is available."
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What happened to Gemini Earn?
Gemini Earn had been giving funds to Genesis as a way to generate the program's promised returns. But in November, Genesis said it could no longer return customer funds, citing “abnormal” volumes of redemption requests after the collapse of the FTX exchange.
FTX and its U.S. branch, FTX.US, 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 underscored 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.
In November, 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.”
Genesis has 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.”
By January, the discussions between Gemini and Genesis had grown acrimonious. Gemini, which is facing a potential class action suit over the crisis, published an open letter calling for the ouster of Barry Silbert, CEO of Genesis's parent company.
The letter argues that Genesis was not forthcoming about the risks involved in its dealings with Three Arrows Capital, a hedge fund whose collapse helped add to the turmoil in crypto even before FTX failed.
"Genesis lenders, including Earn users, have been seriously harmed and deserve a resolution for the recovery of their assets," the letter said, alleging that Silbert and colleagues "conspired to make false statements and misrepresentations to Gemini."
In a statement responding to the Gemini letter, Genesis disputed that characterization.
"While we obviously do not agree with everything that Gemini has said, and we are disappointed that Gemini is waging a public media campaign despite ongoing productive private dialogue between the parties, we remain focused on finding a solution for our borrowing and lending intermediation business and reaching the best outcome for all affected Genesis lending and Gemini Earn clients," the Genesis statement said.
On January 19, Gemini provided another update via a tweet from Cameron Winklevoss, explaining that Genesis had filed for Chapter 11 bankruptcy. This, he explained in a nine-part tweet, was a step in the right direction toward helping Gemini Earn users recover their assets. "Doing so remains our highest priority," he concluded.
» Learn more: What to do if your crypto exchange fails