• The US Securities and Exchange Commission (SEC) has filed charges against Gemini and Genesis for selling unregistered securities through the Gemini Earn product.
• The SEC claims that the two firms misrepresented their business model by advertising returns of up to 8% to clients without registering their partnership as a lending partnership with the relevant authorities.
• Genesis has also been facing liquidity issues after the collapse of FTX and has paused withdrawals to date.
The US Securities and Exchange Commission (SEC) has recently filed charges against Gemini and Genesis for selling unregistered securities through the Gemini Earn product. The SEC claims that the two firms (Genesis and Gemini) misrepresented their business model by advertising returns of up to 8% to clients without registering their partnership as a lending partnership with the relevant authorities.
The Gemini Earn product, introduced in February 2021, was a partnership between Gemini and Genesis, a subsidiary of Digital Currency Group (DCG). The partnership allowed Gemini customers to earn yield by lending their crypto assets to Genesis. However, the SEC alleges that the two failed to notify the relevant authorities of the partnership, effectively selling unregistered securities to customers.
The issue has been compounded by Genesis’ recent liquidity issues after the collapse of FTX. This has resulted in Genesis pausing withdrawals, leaving customers unable to access their funds. Cameron Winklevoss, the co-founder of Gemini, wrote in an open letter that Genesis was working to resolve the issue, but warned that the process could take weeks.
The SEC has now charged both Gemini and Genesis with fraud and is seeking to have both firms and their respective owners, the Winklevoss twins, pay civil penalties for their actions. The SEC is now awaiting the court’s ruling on the matter, with the outcome of the case likely to have far-reaching implications for the cryptocurrency industry.
It remains to be seen what the outcome of the case will be, but it is clear that the SEC is taking a hard stance against companies that fail to comply with its regulations. This case serves as a reminder to companies in the cryptocurrency industry to ensure that they are properly registered and adhere to the relevant laws and regulations.