Crypto exchange Gemini Trust Co. and its founders, twins Tyler and Cameron Winklevoss, are being sued by investors for fraud.
In a filing Tuesday in federal court in Manhattan, investors Brendan Picha and Max J. Hastings alleged the company sold interest-bearing accounts without registering them as securities.
The case revolves around Gemini interest accounts that the company sold to investors through a program called Gemini Earn, in which investors lent Gemini crypto assets in exchange for high interest payments.
According to the suit, “Gemini marketed GIAs with repeated false and misleading statements, including that GIAs were a secure method of collecting interest.” The company halted the program Nov. 16 after crypto platform FTX filed for bankruptcy, “and refused to honor any further investor redemptions, effectively wiping out all investors who still had holdings in the program, including Plaintiffs.”
Read more: Even the Winklevoss twins aren’t immune to the crypto crisis, with $900M of their customers’ money frozen in wake of FTX collapse
FTX’s meltdown caused a liquidity crisis for Gemini, as well as Genesis Trading, which served as Gemini’s borrower in the program.
Also: Genesis meltdown: Why investors are worried about bigger problems for crypto
The suit claims that if the products has been registered as securities, investors would have been better apprised of their risks.
“Gemini’s actions have led to significant financial losses for its investors,” said the suit, which is seeking class-action status. The investors are seeking damages, restitution and “other statutory and equitable relief” from Gemini.
On the Gemini Earn website, a message dated Tuesday reads: “We continued to work through the Christmas holiday towards a resolution. We expect a more fulsome update by the end of this week.”