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SEC Charges Genesis And Gemini Following Crypto Collapse Contagion

 |  January 16, 2023

The Securities and Exchange Commission (SEC) has charged two cryptocurrency companies with offering unregistered securities.

The complaint charges Genesis Global Capital and Gemini Trust Company and centers on the Gemini Earn crypto asset lending program, through which Gemini and Genesis drew hundreds of thousands of investors who weren’t provided necessary information and raised billions of dollars’ worth of crypto assets, the SEC said in a Thursday (Jan. 12) press release.

“We allege that Genesis and Gemini offered unregistered securities to the public, bypassing disclosure requirements designed to protect investors,” SEC Chair Gary Gensler said in the release. “Today’s charges build on previous actions to make clear to the marketplace and the investing public that crypto lending platforms and other intermediaries need to comply with our time-tested securities laws.”

Read more: Ex-SEC Crypto Regulation Expert Joins AnChain.AI

In response to the charge, Gemini Co-Founder and CEO Tyler Winklevoss said in a Twitter thread posted Thursday that the Earn program was regulated by the New York Department of Financial Services (NYDFS) and that Gemini has been in discussion with the SEC about the program for 17 months.

It wasn’t until after Genesis paused withdrawals in November that the SEC raised the prospect of enforcement action, Winklevoss added.

“We look forward to defending ourselves against this manufactured parking ticket,” Winklevoss added in the thread. “And we will make sure this doesn’t distract us from the important recovery work we are doing.”

The Gemini Earn program allowed Gemini customers to loan crypto assets to Genesis, which promised to pay them interest, according to the SEC press release.

Gemini facilitated the transaction and deducted an agent fee from the returns Genesis paid to the investors, while Genesis used the assets to generate revenue and pay the interest, the release said.