The way I see it, a broker doesn't owe Winklevoss exchange's customers. Instead, the Winklevoss exchange owes their customers...

Looks like Winklevoss-paid PR to me.

Well there's the way you see it, and then there's reality.

It has always been widely publicized and is crystal clear in the TOS that with Gemini Earn you are not making secured or insured loans, and that Gemini isn't the borrower. Contrast that with something like IBKR's stock yield enhancement program, where IBKR is the borrower, and they absorb risk that the stock doesn't get returned.

Caveat emptor I guess, but all of this stinks pretty bad. Why anyone would trust crypto with any meaningful amount of money going forward is beyond me.

How is this the fault of crypto? Centralized entities made extremely bad decisions and offered unrealistic rates at the risk of their customers funds.

Defi has been chugging along just fine, and everyone in Uniswap, Aave, Balancer, Curve, etc. still have their all their assets.

This wasn't "mouseprint", this was huge bolded terms at the top of the TOS, and the site [1] made it clear you're earning interest, from borrowers, and it named the borrower, Genesis, on that page.

[1] https://web.archive.org/web/20220129130304/https://www.gemin...

It even informs you, "Gemini Earn customers (the lenders) always assume some level of risk when they decide to lend their funds." Duh.

What kind of person participates in a novel lending opportunity in the magical internet money space without assuming risk of loss?

Considering there's nothing intrinsically valuable or controlled, that's very much the only rationale.

It is entirely possible that Genesis acts as a fronting bank (or whatever regulation exists for cryptocurrency) which means Gemini is just a middle man providing the UI and you were doing business with Genesis. If that is the case then everyone who lent their money out should be fully aware of this.