bundle install errors

Hi,
I was trying to do a bundle install in an application called graylog2 and got this error:
Fetching source index for http://rubygems.org/
/usr/lib/ruby/1.9.1/rubygems.rb:516:in `initialize': not in gzip format (Zlib::GzipFile::Error) I get this same error when I try to do a gem update

Maybe a Ruby gems issue ?

#gem -v  1.3.7
#gem list
*** LOCAL GEMS ***

bigdecimal (1.1.0)
bundler (1.0.21)
git (1.2.5)
io-console (0.3)
json (1.5.4)
minitest (2.5.1, 1.6.0)
rake (0.9.2.2, 0.8.7)
rdoc (3.9.4, 2.5.8)

#gem env
RubyGems Environment:
  - RUBYGEMS VERSION: 1.3.7
  - RUBY VERSION: 1.9.2 (2010-08-18 patchlevel 0) [x86_64-linux]
  - INSTALLATION DIRECTORY: /usr/lib/ruby/gems/1.9.1
  - RUBY EXECUTABLE: /usr/bin/ruby
  - EXECUTABLE DIRECTORY: /usr/bin
  - RUBYGEMS PLATFORMS:
    - ruby
    - x86_64-linux
  - GEM PATHS:
     - /usr/lib/ruby/gems/1.9.1
     - /root/.gem/ruby/1.9.1
  - GEM CONFIGURATION:
     - :update_sources => true
     - :verbose => true
     - :benchmark => false
     - :backtrace => false
     - :bulk_threshold => 1000
     - :sources => []
     - :repositories => "http://rubygems.org/gems"
  - REMOTE SOURCES:
     - http://rubygems.org/
ruby 1.9.2p0 (2010-08-18 revision 29036) [x86_64-linux]

appreciate any help or suggestions.

Thanks.