The Winklevoss twins and their embattled cryptocurrency site Gemini were slapped this week by a potential class action lawsuit from a pair of disgruntled investors who accused them of fraud and other violations.
The lawsuit 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 without fully alerting clients to potential risks.
Gemini is working to recover $900 million in client funds held by its lending partner on interest-bearing accounts, Genesis, which has faced a liquidity crunch due to what it described as “unprecedented turmoil in the market” related to the collapse of FTX.
Gemini “refused to honor any further investor buyouts, thereby eliminating all investors who still held interests in the program,” according to the lawsuit filed Tuesday.
The Winklevoss twins founded Gemini in 2014. The pair became crypto kingpins after gaining notoriety for their legal war against Facebook with former Harvard schoolmate Mark Zuckerberg.
The “Gemini Earn” program billed itself as a way for customers to earn interest on their digital currency holdings. The Winklevoss twins platform said participants could earn up to 8% annual interest.
When Genesis faced potential insolvency last month, Gemini was forced to stop withdrawals from “Earn” accounts.
Picha and Hastings, who are seeking class action status on behalf of other Gemini customers affected by the situation, accused the twins of marketing the interest-bearing accounts “with repeated false and misleading statements, including that the [accounts] were a safe method of collecting interest.
The plaintiffs claim that customers would have been aware of “necessary and meaningful disclosures” about the program’s potential risks if Gemini had marketed them as titles.
Besides fraud, the prosecution charged the Winklevoss twins with violations of the Exchange Act.
Gemini’s Customer Service Agreement states that any account disputes will be resolved by arbitration. A number of clients have already filed for arbitration, according to Bloomberg.
The agreement also indicates that the offers involved risks, including a potential “total loss” of the client’s investment.
The Post has contacted Gemini to comment on the lawsuit.
Gemini has provided regular updates on the status of its “Earn” accounts on its website – the most recent of which was posted on Tuesday.
“We continued to work over the Christmas holidays to find a solution. We expect a more comprehensive update by the end of this week,” the update reads.