Dezember 2023

SEC Charges Gemini and Genesis for Selling Unregistered Securities

• The US Securities and Exchange Commission (SEC) has filed charges against Gemini and Genesis, accusing the two of selling unregistered securities through the Gemini Earn product.
• The Gemini Earn allowed Gemini and Genesis to earn billions of dollars from investors despite the product being unregistered, and the two firms misrepresented their business model by advertising returns of up to 8%.
• Genesis found itself in turmoil after the FTX’s collapse and even paused withdrawals due to liquidity issues.

The US Securities and Exchange Commission (SEC) recently filed charges against cryptocurrency exchange Gemini and its partner Genesis, accusing the two of selling unregistered securities. The two companies have allegedly been earning billions of dollars from investors through the Gemini Earn product, and have been misrepresenting their business model by offering returns of up to 8%.

The Gemini Earn product was introduced in February 2021 and ran until January 8 2022. During that time, Gemini had a partnership with Genesis, a subsidiary of Digital Currency Group (DCG). Through this partnership, Gemini customers were able to earn yield by lending their crypto assets to Genesis. However, the SEC alleges that the two firms failed to register the partnership as a lending partnership with the relevant authorities.

The SEC’s charges also come at a time when Genesis is facing liquidity issues after the collapse of FTX, and has paused withdrawals due to lack of funds. Cameron Winklevoss, the co-founder of Gemini Earn, wrote in an open letter that Genesis had to pause withdrawals due to the “unprecedented market conditions” and “lack of liquidity”.

Despite the SEC’s charges, neither Gemini nor Genesis have admitted any culpability. In a blog post, Winklevoss stated that they “have not been found to have violated any laws, regulations or other requirements,” and that they are “committed to working with the SEC to resolve this matter.”

Gemini and Genesis have both stated that they are fully cooperating with the SEC’s investigation, and are currently working on resolving the issue. In the meantime, the two firms have halted the Gemini Earn product, and are no longer offering returns to investors. It is still unclear what the outcome of the SEC’s charges will be, but it is likely that the two firms will be required to pay fines and/or face other sanctions.