The SEC also revealed that Genesis and Gemini generated assets worth hundreds of dollars from hundreds of thousands of investors.
On the 12th of January, the US Securities and Exchange Commission (SEC) charged crypto exchange Gemini and crypto lending firm Genesis Global Capital with offering and selling unregistered securities. Both companies entered a deal in December 2020 to provide customers of the exchange company with a yield-bearing crypto product. After they reached an agreement, the product tagged Gemini Earn, which touted up to 8% yields for customers, was launched in February 2021. Per the agreement, Gemini customers would loan their crypto assets to Genesis while the crypto lending firm repays with interest.
Sec Files Complaint against Genesis and Gemini
As the SEC charges both Genesis and Gemini, the Commissionย claimsย that the Earn program constitutes the offering and sales of securities that should have been registered. The agency explained that after Genesis sent a portion of the profits of the loan back to Gemini, the latter deducted an agent fee. According to the SEC, the agent fee sometimes could be more than 4%, after which the crypto exchange gives the balance to its users. SEC officials stated that Genesis should have registered the product as a securities offering.
Additionally, the SEC revealed that Genesis and Gemini generated assets worth hundreds of dollars from hundreds of thousands of investors. The agency has started an investigation to determine if the joint venture violated other securities laws. It also investigates if there are other entities and persons involved in the โalleged misconduct.โ SEC boss Gary Gensler commented:
โTodayโs 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. Itโs not optional. Itโs the law.โ
Meanwhile, Genesis announced on the 10th of November that it had about $172 million worth of funds in FTX, which recently crumbled. Its parent company Digital Currency Group (DCG), sent $140 million on the same day to help โstrengthen its balance sheet.โ However, it was not enough, as Genesis halted withdrawal a few days later, citing โunprecedented market turmoil.โ
Cameron Winklevoss Calls out DCG CEO
This led to Gemini co-founder Cameron Winklevossโs claims that Genesis and DCG owe the exchangeโs clients $900 million. The businessman wrote anย open letterย to DCG CEO Barry Silbert, stating that 349,000 Gemini Earn users are impacted by the withdrawalโs suspension. He added that Silbert has been engaging in bad faith despite Geminiโs effort to have a conversation about the situation.
Tyler Winklevoss of Gemini responded to the SEC complaint on Twitter, saying that:
โItโs disappointing that the SEC 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 counterproductive.โ
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Ibukun is a crypto/finance writer interested in passing relevant information, using non-complex words to reach all kinds of audience.
Apart from writing, she likes to see movies, cook, and explore restaurants in the city of Lagos, where she resides.
