The Winklevoss twins and their embattled cryptocurrency site Gemini were slapped with a possible class motion lawsuit this week from a pair of disgruntled investors who accused them of fraud and other violations.
The criticism filed by investors Brendan Picha and Max J. Hastings alleges that Cameron and Tyler Winklevoss sold interest-bearing accounts on Gemini without registering them as securities and fully alerting customers of the potential risks.
Gemini is scrambling to get well $900 million in customer funds held by its lending partner on the interest-bearing accounts, Genesis, which faced a liquidity crisis resulting from what it described as “unprecedented market turmoil” related to FTX’s collapse.
Gemini “refused to honor any further investor redemptions, effectively wiping out all investors who still had holdings in this system,” based on the lawsuit filed on Tuesday.
The Winklevoss twins founded Gemini in 2014. The pair became crypto kingpins after gaining notoriety for his or her legal war over Facebook with former Harvard classmate Mark Zuckerberg.
Cameron and Tyler Winklevoss are best known for his or her legal battle with Mark Zuckerberg.Bloomberg via Getty Images
The “Gemini Earn” program billed itself as a way for purchasers to earn interest on their digital currency holdings. The Winklevoss twins’ platform said participants could earn as much as 8% in annual interest.
When Genesis faced potential insolvency last month, Gemini was forced to halt withdrawals on “Earn” accounts.
Picha and Hastings, who’re in search of class motion status on behalf of other Gemini customers affected by the situation, accused the twins of selling the interest-bearing accounts “with repeated false and misleading statements, including that the [accounts] were a secure approach to collecting interest.”
Gemini conducted layoffs over the summer as crypto prices plunged.Bloomberg via Getty Images
The plaintiffs assert that customers would have been aware about “essential and meaningful disclosures” in regards to the program’s potential risks if Gemini had marketed them as securities.
Other than fraud, the suit accused the Winklevoss twins of violations of the Exchange Act.
Gemini’s customer support agreement notes that any disputes over accounts will likely be resolved through arbitration. Numerous customers have already filed arbitration claims, based on Bloomberg.
The agreement also indicates that the offerings had risks, including a possible “total loss” of the client’s investment.
The Post has reached out to Gemini for comment on the lawsuit.
Gemini has provided regular updates in regards to the status of its “Earn” accounts on its website – probably the most recent of which was published on Tuesday.
“We continued to work through the Christmas holiday towards a resolution. We expect a more fulsome update by the tip of this week,” the update said.