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Tyler and Cameron Winklevoss and their crypto exchange have been sued by investors in New York for alleged fraud.
Brendan Picha and Max J Hastings claim in a class-action filing in federal court in Manhattan that Gemini Trust Co. offered interest of up to 7.4 per cent to customers for lending them crypto assets.
But the lawsuit states that the company did not register those assets as securities in accordance with US securities laws.
The company halted the Gemini Earn programme on 16 November after crypto platform FTX filed for bankruptcy. And the collapse of FTX created liquidity issues for Genesis Trading, which acted as Gemini’s borrower for the $900m programme.
“Gemini marketed GIAs with repeated false and misleading statements, including that GIAs were a secure method of collecting interest,” the lawsuit states.
It added that the company shut down the programme “and refused to honor any further investor redemptions, effectively wiping out all investors who still had holdings in the program, including Plaintiffs.”
The lawsuit claims that if the Gemini product had been registered as securities then investors would have had more awareness of the risks involved.
“Gemini’s actions have led to significant financial losses for its investors,” the lawsuit states.
FTX founder Sam Bankman-Fried is currently under house arrest in California after being extradited back to the US from The Bahamas.
Prosecutors claim he ran a years-long fraud using billions of dollars of customer deposits in his crypto firm to cover losses at his Alameda Research hedge fund, buy real estate and make political donations.
He is expected back in court in January and is charged with two counts of wire fraud and six counts of conspiracy, including laundering money and committing campaign finance violations. If convicted, he faces decades in prison.
The Independent has reached out to Gemini for comment.