SEC Charges Gemini and Genesis Over Unregistered Securities

The United States Securities and Exchange Commission (SEC) has charged cryptocurrency lending firm Genesis Global Capital and crypto exchange Gemini with offering unregistered securities through Gemini’s “Earn” program. 

Today we charged Genesis Global Capital, LLC and Gemini Trust Company, LLC for the unregistered offer and sale of securities to retail investors through the Gemini Earn crypto asset lending program.

For more:

— U.S. Securities and Exchange Commission (@SECGov) January 12, 2023

According to the Jan. 12 SEC’s filing, the charges relate to Gemini’s crypto asset lending program, Gemini Earn. SEC Chair Gary Gensler remarked that Genesis and Gemini both offered unregistered securities to the public.

He harped that the action violated the disclosure requirements provided to protect investors engaging in any digital assets.

Recall that Genesis, a subsidiary of Digital Currency Group (DCG), entered into a partnership deal with Gemini in Dec. 2020 to offer the exchange’s customers a yield-bearing crypto product which was later launched in February 2021.

However, SEC argued that the agreement enabled Gemini customers to loan their crypto to Genesis under the promise that the latter would repay the loan with interest.

On the contrary, the program which ought to have been registered with the commission was unregistered; as such, it did not meet the requirements to protect investors.

Gensler further stressed that the Gemini Earn Program is a perfect example of an offer and sale of securities which should have been treated as such by the two crypto firms.

Genesis and Gemini Exchange Struggles Continue

There are no mincing words that the financial crisis facing Gemini exchange and Genesis Global capital had just started with the latest legal tussle with SEC. Recall that Genesis Global had to put its service on hold following the FTX Collapse.

The lending firm cited ‘unprecedented market turmoil’ as the main reason responsible for the abnormal withdrawal requested which surpassed existing liquidity.

However, FTX has created unprecedented market turmoil, resulting in abnormal withdrawal requests which have exceeded our current liquidity.

— Genesis (@GenesisTrading) November 16, 2022

More recently, Genesis announced the sacking of 30% of its workers on Jan. 6 which was the second round of layoffs in six months. 

Meanwhile, Gemini co-founder, Cameron Winklevoss, revealed on Jan. 10 that Genesis and DCG owed $900 million to Gemini’s clients because they were part of the program. More than any other, laws should be allowed to take their course to aid transparency.