Shareholders sue Gemini and its executives for allegedly misrepresenting the company's direction after its September IPO, resulting in significant losses.
Gemini, the crypto exchange co-founded by Tyler and Cameron Winklevoss, is facing a proposed class-action lawsuit filed in a Manhattan federal court. The lawsuit claims that Gemini and its executives made misleading statements in the company's IPO documents, portraying it as a growing exchange focused on expanding its user base and international presence.
According to the complaint from plaintiff Marc Methvin, Gemini shifted abruptly to a prediction-market-centric business model after its September IPO. The IPO priced shares at $28, with the stock briefly reaching $40 before plummeting more than 80% to around $6 by Thursday.
Lawsuit Details and Allegations
The plaintiffs allege that investors bought shares at artificially inflated prices due to these misrepresentations. In November, Gemini executives publicly emphasized the company's commitment to international expansion into key global markets, but by February, the firm announced a pivot to "Gemini 2.0" focused on prediction markets.
As part of this shift, Gemini announced it would cut 25% of its workforce and exit markets in the EU, UK, and Australia. The complaint states that this change, along with increased operating expenses of around 40%, contributed to the stock's decline to an all-time low of $5.82 by February 20.
In February, Gemini also saw the departure of its chief financial officer, chief operations officer, and chief legal officer. Despite these challenges, the company reported on Thursday that its fourth-quarter revenues rose 39% year-on-year to $60.3 million, exceeding analyst expectations of $51.7 million.
The shareholders are seeking a jury trial and damages to compensate for losses incurred after the IPO. This lawsuit highlights ongoing scrutiny of crypto firms' post-IPO strategies and their impact on investors.
