Gemini Space Station Inc., the publicly traded crypto exchange founded by Cameron and Tyler Winklevoss, said credit card revenue jumped 231% from a year earlier to $16.2 million.
- A review of Gemini's quarterly results by The Coinformer found that the $16.1 million set aside for expected losses equaled 99.4% of its credit card revenue.
- The credit card was Gemini's largest separately reported source of revenue during Q2, bringing in more than the $12.5 million generated by its crypto exchange.
More fraudulent accounts emerged in Q2
Gemini first set aside $4.1 million in Q1 after finding identity fraud among a group of newly opened credit card accounts.
As the investigation continued, Gemini said it found "additional fraud patterns and affected accounts" tied to the same group of Q1 card openings. Those accounts "migrated into later-stage delinquency buckets" in Q2, meaning more customers fell further behind on payments and Gemini raised its estimate of expected losses.
Gemini said the problem was concentrated among the identified accounts and "does not reflect broad-based deterioration" across the rest of its card business.
The company didn't say how many accounts were involved, how much was fraudulently borrowed or how much money it expects to recover.
It said it had added new fraud checks and account monitoring.
Rewards and expected losses exceeded card revenue
The amount owed on Gemini credit cards reached $219.6 million at the end of Q2, up 135% from $93.5 million a year earlier. Spending on crypto rewards, promotions and referrals also rose 33% to $8.7 million.
- Those rewards and the money set aside for expected losses totaled $24.8 million, exceeding card revenue by $8.6 million before other costs.
- The $16.1 million figure doesn't mean Gemini lost all that money during Q2.
- It is the company's estimate of how much it may not collect from the credit card accounts.
Gemini reported $45.5 million in total revenue and a $107.7 million net loss for the quarter. Exchange revenue fell 38% as trading volume dropped 66%, making the fast-growing credit card business increasingly important to the company.
- The Coinformer reached out to Gemini for comments and will update the story once the company responds.