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Twins Cameron and Tyler Winkelvoss are facing a significant class-action lawsuit from investors who used Gemini, their cryptocurrency exchange.
According to Bloomberg, aggrieved investors believe the exchange and Winkelvosses sold them interest-bearing accounts that weren’t registered as securities.
The Winkelvosses, who first gained fame after suing Facebook over its resemblance to an earlier social media site they founded, launched New York-based Gemini in 2014. Consumers use the platform to buy and sell digital assets, and one of the company’s most popular programs has been Gemini Earn. The initiative, launched in 2020, lets users earn interest on their crypto holdings and received plenty of attention from the crypto community and media outlets.
As described in a press release from Kim & Serritella LLP — the law firm that filed the action in the Southern District of New York (SDNY) — the suit claims explicitly that the defendants failed the plaintiffs by not telling them customers’ assets were loaned out at below-market rates or used for other types of possibly risky securities transactions. The suit also alleges some investors received no earnings despite following Gemini’s instructions. The plaintiffs are seeking damages for losses that resulted from the alleged misrepresentations.
The outcome of this case has profound implications for crypto asset investors and crypto asset exchanges. If successful, it could lead to tighter regulations surrounding certain aspects of digital asset trading, such as disclosure requirements or customer protections — which could impact investment decisions regarding cryptocurrencies.
The case against Gemini‘s Earn program highlights some critical issues related to investment disclosure requirements and customer protections within the cryptocurrency space — issues that will likely be addressed more directly in the future, regardless of how this particular case turns out.