• The US Securities and Exchange Commission (SEC) has filed charges against Genesis and Gemini accusing the two of selling unregistered securities through the Gemini Earn product.
• The Gemini Earn product was introduced in February 2021 and allowed Gemini customers to earn yield by lending their crypto assets to Genesis, with returns of up to 8%.
• Genesis has been having liquidity issues after FTX’s collapse and has paused withdrawals to date.
The US Securities and Exchange Commission (SEC) has filed charges against crypto firms Gemini and Genesis, accusing them of selling unregistered securities. The SEC alleges that Gemini and Genesis misrepresented their business model by advertising returns of up to 8% to customers, without first registering the partnership as a lending partnership with the relevant authorities.
The Gemini Earn product was introduced in February 2021 and allowed Gemini customers to earn yield by lending their crypto assets to Genesis. The product ran until January 8 2022 and saw Gemini and Genesis earn billions of dollars from investors. Unfortunately, Genesis has had liquidity issues since the collapse of FTX, and has had to pause withdrawals to date.
The SEC has accused both firms of violating the Securities Act of 1933, which requires companies to register securities offerings with the SEC prior to selling them to investors. The charges against both firms also include a cease-and-desist order, which requires them to cease and desist from violating the securities laws in the future.
The SEC also stated that any investors who purchased the unregistered securities from Gemini or Genesis may be eligible for compensation in the form of a rescission offer, which would allow them to receive a refund for the securities they purchased.
The SEC’s action against Gemini and Genesis serves as a reminder to crypto investors that they should always do their due diligence and make sure that crypto companies are compliant with the relevant regulations before investing. It also highlights the importance of understanding the legal and regulatory framework of the crypto industry, and the need for crypto companies to ensure that they comply with all applicable laws.
The SEC’s action against Gemini and Genesis is the latest in a series of regulatory actions taken by the agency against crypto companies in the US. It is likely that the SEC will continue to take a firm stance on crypto companies that do not comply with the applicable laws and regulations.