The United States Securities and Exchange Commission (SEC) on Jan. 12 charged cryptocurrency lending firm Genesis Global Capital and crypto exchange Gemini with offering unregistered securities through Gemini’s “Earn” program.
In December 2020, Genesis, a subsidiary of crypto conglomerate Digital Currency Group (DCG) entered into a deal with Gemini to offer the exchange’s customers the yield-bearing crypto product. This was then launched in February 2021.
Under the agreement, Gemini customers could loan their crypto to Genesis under the promise the latter would repay the loan with interest. Genesis had full control over how it would earn a yield to repay Gemini creditors.
In a statement, the SEC said its complaint alleges that the Gemini Earn program constitutes an offer and sale of securities and should have been registered with the commission.
“We allege that Genesis and Gemini offered unregistered securities to the public, bypassing disclosure requirements designed to protect investors,” SEC Chair Gary Gensler said in a
It wasn’t enough, and on Nov. 16 Genesis suspended withdrawals, citing “unprecedented market turmoil.”
Related: Congress may be ‘ungovernable,’ but US could see crypto legislation in 2023
Gemini co-founder, Cameron Winklevoss has since claimed that Genesis and DCG owes $900 million to Gemini’s clients. In a Jan. 10 open letter from Winklevoss, he claimed more than 340,000 users were a part of Gemini’s Earn program.
The SEC said its investigating other securities law violations from other entities relating to the Gemini Earn program.
The SEC’s complaint was filed in the U.S. District Court for the Southern District of New York.
