Genesis And Gemini Charged By SEC Over Alleged Unregistered Security Sale
Please note that we are not authorised to provide any investment advice. The content on this page is for information purposes only.
Genesis Global and Gemini have both been charged by the US Securities and Exchange Commission (SEC). These charges are in regard to the SEC deeming the Gemini Earn crypto asset program as a means to allow retail investors to access unregistered securities through the sale of the assets and offerings.
Table of Contents
A Sound Plan (On Paper)
The SEC complaint stipulates that the Gemini exchange had entered into an agreement with Genesis. This agreement pertained to Genesis offering Gemini’s customers to lend their crypto assets to Genesis itself. This comes with the promise of Genesis to pay interest once the loan is complete.
The SEC explained that Gemini and Genesis had cooperated to offer the Genesis Earn program to retail investors. In this program, investors of Gemini Earn could tender their various crypto assets to Genesis. Through this, Gemini acted as a facilitator, deducting an agent fee from the transaction as a whole. This agent fee sometimes went as high as 4.29%, according to the SEC, and Genesis paid the investors of Gemini Earn with the returns made on these investments.
The Charges In Question
The SEC claims that Genesis then utilized the funds borrowed from them and used its own discretion in regard to using these assets to generate revenue. This revenue was then used to pay interest to Gemini Earn investors.
It’s alleged via the complaint of the SEC that the Gemini Earn program subsequently classifies as the sale and offering of securities under applicable law. As such, the SEC claims that the entire thing should have been registered with the SEC before anything even started. They further allege that through this service, both Genesis and Gemini offered the public unregistered securities, doing so while the disclosure requirements used to protect the public was bypassed.
Market Volatility To Blame
Further allegations from the SEC date back to November of 2022. According to the SEC, Genesis had officially stated that Gemini Earn customers would not be allowed to withdraw their crypto assets. The statement highlighted that Genesis had insufficient liquidity in order to meet the needs of the investors after a volatile period within the crypto market.
The SEC explained that at that time, Genesis had held approximate of $900 million in assets from their investors, who themselves ranged from 340,000. The SEC explained that Gemini had terminated the offering in January of 2023. Reports are also coming in that Genesis has filed for bankruptcy, which would help in the retrieval of investor funds once it sees fruition.
Winklevoss Claims SEC Charge To Be Parking Ticket
Tyler Winklevoss, one of the co-founders of Gemini, has since given out a tweet about the matter at large. Winklevoss condemns the behavior of the SEC as “counterproductive.” According to Winklevoss, Gemini and other creditors are hard at work, working together in a bid to recover the funds.
He went further, describing these charges from the SEC as a “manufactured parking ticket” and claims that Gemini is eager to defend itself against it. Winklevoss further claimed that these charges would not distract Gemini in its work to recover the lost funds.
