SEC Files Charges Against Gemini, Genesis Over Unregistered Securities
• The US SEC has filed charges against Gemini and Genesis for selling unregistered securities through the Gemini Earn product.
• The partnership between Gemini and Genesis allowed customers to earn yield by lending their crypto assets to Genesis.
• Genesis has been having liquidity issues after FTX’s collapse and has paused withdrawals to date.
The US Securities and Exchange Commission (SEC) has recently filed charges against both Gemini and Genesis for allegedly selling unregistered securities through the Gemini Earn product. The product, which was launched in February 2021, allowed customers to earn yield through lending their cryptocurrency assets to Genesis, a subsidiary of Digital Currency Group (DCG).
However, the SEC believes that the two companies misrepresented their business model by advertising returns of up to 8% to investors without first registering the partnership as a lending partnership with the relevant authorities. This has resulted in investors being handed significant losses, which is why the SEC has taken this action.
Unfortunately, the situation has not been helped by the fact that Genesis has been experiencing liquidity issues after the collapse of FTX. This has led to the company pausing withdrawals, meaning that customers are unable to access their funds.
The SEC has stated that both Gemini and Genesis have violated federal securities laws and that they need to register the product as a security before they can continue to offer it. It is unclear at this stage what penalties the two companies may face, but the SEC is expected to take action in the near future.
This case is just the latest in a series of SEC investigations into cryptocurrency companies and serves as a warning to other companies who may be tempted to offer unregistered securities. It also serves as a reminder of the importance of companies ensuring that their products are fully regulated and compliant with all applicable laws.