SEC Accuses Gemini And Genesis Of Marketing Unregistered Securities

Genesis and Gemini, two digital asset trading companies, have been accused of issuing and selling unregistered securities by the Securities and Exchange Commission (SEC).

According to the SEC’s lawsuit, Gemini and Genesis’ crypto asset lending scheme, Gemini Earn, made it easier for regular investors to buy and sell unregistered securities, enabling both companies to raise billions of dollars worth of cryptocurrency.

The enforcement action describes how the cryptocurrency asset-lending scheme permitted its clients to tender their cryptocurrency tokens to Genesis in exchange for a competitive interest rate. On these transactions, Gemini assessed agent fees (up to 4.29%).

Genesis declared in November 2022 that it would not permit Gemini Earn customers to withdraw their cryptocurrency assets because it needed more liquidity to fulfill withdrawal requests. Approximately 900 million dollars in investor assets from over 300,000 Gemini Earn investors were held by Genesis at the time of this revelation. Digital Currency Group (DCG), the parent company of Genesis, is considering selling assets to earn money to settle the more than $3 billion in debt it has to creditors.

Gemini terminated the Gemini Earn program earlier this month, but individual investors can still withdraw their funds.

Tyler Winklevoss, the Gemini CEO, took to Twitter to respond to the SEC’s Thursday filing, stating: “It’s disappointing that the @SECGov chose to file an action today as @Gemini and other creditors are working hard together to recover funds. This action does nothing to further our efforts and help Earn users get their assets back. Their behavior is totally counterproductive […] It’s disappointing that the @SECGov chose to file an action today as @Gemini and other creditors are working hard together to recover funds. This action does nothing to further our efforts and help Earn users get their assets back. Their behavior is totally counterproductive.”

SEC chair Gary Gensler said in a statement:

“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. Doing so best protects investors. It promotes trust in markets. It’s not optional. It’s the law.”

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