The Winklevoss twins and their embattled cryptocurrency site Gemini were slapped with a potential class action lawsuit this week from a pair of disgruntled investors who accused them of fraud and other violations.
The complaint 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 recover $900 million in customer funds held by its lending partner on the interest-bearing accounts, Genesis, which faced a liquidity crisis due to 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 the program,” according to the lawsuit filed on Tuesday.
The Winklevoss twins founded Gemini in 2014. The pair became crypto kingpins after gaining notoriety for their legal war over Facebook with former Harvard classmate 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% in annual interest.
When Genesis faced potential insolvency last month, Gemini was forced to halt withdrawals on “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 secure method of collecting interest.”
The plaintiffs assert that customers would have been privy to “necessary and meaningful disclosures” about the program’s potential risks if Gemini had marketed them as securities.
Aside from fraud, the suit accused the Winklevoss twins of violations of the Exchange Act.
Gemini’s customer service agreement notes that any disputes over accounts will be resolved through arbitration. A number of customers have already filed arbitration claims, according to Bloomberg.
The agreement also indicates that the offerings had risks, including a potential “total loss” of the customer’s investment.
The Post has reached out to Gemini for comment on the lawsuit.
Gemini has provided regular updates about the status of its “Earn” accounts on its website – 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 end of this week,” the update said.