The US Securities and Exchange Commission has filed charges against crypto lender Gemini and Genesis for selling unregistered securities through Gemini’s “Earn” scheme.
The SEC claims that Earn allowed Genesis and Gemini to raise billions of dollars from hundreds of thousands of investors through these unregistered offerings.
Association between Genesis and Gemini
Earn was introduced by Gemini in February 2021 and remained in operation until January 8 of the following year.
As a result of a partnership with cryptocurrency lender and Digital Currency Group (DCG) subsidiary Genesis, Gemini clients were given the opportunity to earn returns by lending their cryptocurrency to the market maker company.
He SECOND He said the firms misrepresented their business model by announcing yields of up to 8% to their clientele without registering as a loan company with the proper authorities.
According to open letters written by Gemini Earn co-founder Cameron Winklevoss, Genesis owes $900 million to 340,000 Gemini Earn users.
Genesis withdrawals and SEC crackdown
As the FTX turmoil sent shockwaves through the crypto market last year, Genesis halted withdrawals on the platform due to a lack of liquidity.
“US retail investors who participated in the Gemini Earn program have suffered significant harm,” the SEC states. Approximately 340,000 investors lost funds due to the withdrawal freeze.
“Today’s charges build on previous actions to make clear to the market and the investing public that crypto lending platforms and other intermediaries must comply with our time-tested securities laws,” says SEC Chairman Gary Gensler.
Gemini co-founder calls SEC actions ‘counterproductive’
In reply To the SEC’s charges against the crypto exchange, Cameron Winklevoss defended the company by stating that the exchange is working hard to win back funds from investors and called the SEC’s actions “super boring” and “counterproductive.”
“As a matter of background, the Earn program was regulated by @NYDFS and we have been in discussions with the SEC about the Earn program for over 17 months. They never raised the possibility of any enforcement action until AFTER Genesis stopped the withdrawals on November 16,” said Tyler Winklevoss.
According to the co-founder, Gemini will defend itself against SEC claims that he described as a “parking ticket.” And to wrap up his defense, Tyler gave a hello to Bitcoin and wrote this:
7/ Oh, and on a more positive note, Bitcoin hit 19k today! Forward!
—Tyler Winklevoss (@tyler) January 12, 2023
The crackdown on Gemini and Genesis means the SEC is taking precautionary measures to prevent fraud like FTX from happening again.
Meanwhile, the SEC is also investigating whether or not other companies or individuals are connected to the alleged misconduct, as well as whether or not other securities law violations were committed.
-Cover image from Pixabay and Bitcoin chart from Tradingview.com.
