• A class-action lawsuit was filed against Gemini Trust Co. and its founders, Tyler and Cameron Winklevoss, alleging that the U.S. cryptocurrency exchange sold unregistered securities in the form of interest-bearing accounts.
• The plaintiffs, Brendan Picha and Max J. Hastings, filed the action in a Manhattan federal court, accusing the company and its founders of fraud and violations of the Exchange Act.
• The lawsuit comes about a month after Gemini halted withdrawals due to liquidity issues facing one of its business partners.
Crypto exchange Gemini Trust Co. and its founders, Tyler and Cameron Winklevoss, are currently facing a class-action lawsuit alleging that they have sold unregistered securities in the form of interest-bearing accounts. The lawsuit was filed in a Manhattan federal court by plaintiffs Brendan Picha and Max J. Hastings, who are accusing the company and its founders of fraud and violations of the Exchange Act.
This lawsuit comes just a month after Gemini halted withdrawals due to liquidity issues facing one of its business partners. According to the investors, the Gemini Trust Earn program, which was launched in October 2019, was sold as an interest-bearing account with a fixed interest rate of up to 8.6% annually. However, the investors claim that the program was unregistered and that they were not informed of the risks associated with such an investment.
The investors also allege that Gemini, through its founders, made false and misleading statements about the program in order to entice investors to participate. They state that the company claimed that the earnings from the account were guaranteed, despite the fact that the interest rate was variable and could be changed at any time. They also allege that Gemini failed to disclose the amount of risk associated with the account, and that the Winklevoss twins and Gemini failed to adhere to their own terms of service.
The lawsuit states that Gemini and its founders „recklessly and negligently misrepresented and failed to disclose material facts“ regarding the Gemini Trust Earn program. It also states that Gemini failed to adequately warn investors of the risks associated with the program, and that they failed to disclose the amount of risk associated with the account.
The plaintiffs are seeking compensatory and punitive damages as well as other relief as the court may deem just and proper. They are also seeking a return of all monies invested in the Gemini Trust Earn program.
This is yet another blow to the Winklevii-spearheaded crypto exchange, as it continues to face a number of legal troubles. While the company has not commented on the lawsuit, it is likely that it will vigorously defend itself against the allegations. If the allegations are proven to be correct, then it could be a significant setback for the company, as it attempts to establish itself as a credible and trustworthy exchange.