Arbitrator Clears Gemini in Earn Lending Collapse, Interest Claims Still Unresolved

An arbitrator sided with crypto exchange Gemini on Aug. 12, ruling the company was not at fault for the 2022 collapse of its Earn lending program and did not mislead the customers who used it, according to a ruling reviewed by CNBC.

The claim came from a single Earn user who filed in late 2024. The arbitrator found no evidence Gemini lied to customers or skipped due diligence on Genesis Global Capital, the lending partner Gemini used to funnel user crypto to institutional borrowers.

Instead, the arbitrator pointed the finger at Genesis and its parent, Digital Currency Group, run by Barry Silbert. The ruling called the fraud at Genesis and DCG "massive" and said it went undetected by Genesis's own auditors and by regulators until Gemini uncovered it. DCG agreed last year to pay the SEC $38.5 million for misleading investors. Silbert is still facing multiple multibillion-dollar lawsuits accusing him of defrauding investors; neither Silbert nor DCG responded to CNBC's request for comment.

How Earn Fell Apart

Gemini launched Earn in 2021, promising yields up to 7.4% a year on crypto users lent out through Genesis. More than 300,000 people used it. Gemini froze withdrawals in November 2022, days after Genesis itself paused loan originations and redemptions during that year's crypto market crash.

The fallout was fast. The New York Attorney General sued Gemini over Earn and settled for $50 million in 2024. The SEC separately sued Gemini and Genesis in January 2023, alleging Earn was an unregistered securities offering; U.S. District Judge Edgardo Ramos declined to dismiss that case in March 2024. The SEC ultimately dropped the case with prejudice on Jan. 23, 2026, citing the fact investors had been made whole, according to Crypto Times. That closed the case without ever testing in court whether yield-bearing crypto lending counts as a security.

Gemini reached a settlement in principle with Genesis and other creditors in February 2024. Three months later, in May 2024, Earn users got back $2.18 billion in digital assets in kind, equal to 97% of what they were owed and $1 billion more in dollar terms than the assets were worth when the freeze hit, because crypto prices had risen since November 2022.

What the Ruling Doesn't Settle

The arbitration win covers exactly one claimant. Arbitration decisions bind only the parties involved and can't be appealed, so this outcome sets no precedent for the more than a dozen other disputes still pending against Gemini, and other arbitrators aren't bound by this one's reasoning.

Getting your principal back isn't the same as getting what you were promised. Earn advertised yields up to 7.4% annually. Users got their crypto back, not the interest they were told they'd earn for lending it out. Gemini's framing of the May 2024 payout as a "232% recovery" compares the value at repayment to the frozen 2022 price, not to what a 7.4% yield would have delivered over the freeze period. Separate arbitrations over that unpaid interest are still active and could still produce a financial judgment against Gemini, even after this ruling.

Gemini's defense throughout, including in this arbitration, has been that it acted as an agent connecting users to Genesis rather than as the lender itself, and therefore had no obligation to make good on assets Genesis lost. The arbitrator accepted that framing for this claim. Whether it holds up in the remaining arbitrations is an open question, since each is decided independently.

A Separate Case, Same Industry

In an unrelated matter, federal prosecutors in Los Angeles are pursuing Edward Zimbardi, a 59-year-old from Flowery Branch, Georgia, on charges of running a $165 million crypto Ponzi scheme called The Crypto Program between June 2022 and August 2023. Zimbardi allegedly promised investors a guaranteed 25% monthly return on "advertising packages," then funneled money into risky foreign currency trades and used later investors' funds to pay earlier ones, according to the Epoch Times. He was deported from Fiji after fleeing there in July 2025 and was indicted on 12 counts of wire fraud, 12 counts of money laundering, and one count of money laundering conspiracy on July 8. FBI Atlanta special agent Marlo Graham said the agency is still seeking victim information.

For Gemini's Earn claimants, the next test comes as the remaining arbitrations over unpaid interest work through the same process that just cleared Gemini on the underlying collapse. No date has been set for when those decisions will land.