13 Jan

SEC Charges Crypto Exchange Gemini and Lending Firm Genesis with Unregistered Securities

• The US Securities and Exchange Commission (SEC) has charged crypto exchange Gemini and crypto lending firm Genesis Global Capital with offering and selling unregistered securities.
• The SEC alleges that the companies generated assets worth hundreds of dollars from hundreds of thousands of investors with their coin tagged ‘Gemini Earn’.
• The complaint states that the Earn program constitutes the offering and sales of securities that should have been registered with the SEC.

The US Securities and Exchange Commission (SEC) has recently charged crypto exchange Gemini and crypto lending firm Genesis Global Capital with offering and selling unregistered securities. The development came after the companies entered a deal in December 2020 to provide customers of the exchange company with a yield-bearing crypto product.

The product, which was tagged ‘Gemini Earn’, touted up to 8% yields for customers. Per the agreement, Gemini customers would loan their crypto assets to Genesis while the crypto lending firm repays with interest. The SEC alleges that the companies generated assets worth hundreds of dollars from hundreds of thousands of investors.

The SEC complaint states that the Earn program constitutes the offering and sales of securities that should have been registered with the SEC. The Commission further explained that after Genesis sent a portion of the profits of the loan back to Gemini, the latter distributed those profits to its customers. The SEC also mentioned that Gemini had advertised the Earn program as an investment opportunity, which should have been registered as a security in accordance with the securities laws of the United States.

The SEC has now ordered both companies to stop offering and selling unregistered securities, return all proceeds from the sale of the securities and pay a civil penalty. It is still unclear what the exact penalty will be, but it is likely to be significant given the charges being brought against the companies.

This latest development serves as a reminder for those in the crypto space that securities must be registered with the SEC in order to be legally offered or sold. The SEC has made it clear that it will take action against anyone who violates securities laws, and this case serves as a warning that the Commission is serious about enforcing these rules.