13 Jan 2023 Anthony Lehrman
Trouble For Genesis And Gemini As U.S. SEC Imposes Legal Charges
Digital Currency Group’s Genesis and Winklevoss twins’ Gemini are at war with regulators with a new player entering the legal battle - the U.S. Securities and Exchange Commission (SEC). The watchdog has filed formal charges against Genesis Global Capital LLC and Gemini Trust Company LLC for conducting unregistered offers and sales of securities via the Gemini Earn digital asset lending program.
SEC Chair Gary Gensler alleged that “Genesis and Gemini offered unregistered securities to the public, bypassing disclosure requirements designed to protect investors.”
“Today’s charges build on previous actions to make clear to the marketplace and the investing public that crypto lending platforms and other intermediaries need to comply with our time-tested securities laws. Doing so best protects investors. It promotes trust in markets. It’s not optional. It’s the law.” Gensler added.
What went wrong?
Barry Silbert’s Digital Currency Group (DCG), owning Genesis, had entered into a deal with Gemini to offer U.S.-based retail investors and other clients the opportunity to lend digital assets to Gemini in return for an interest fee.
However, the Winklevoss twins have been fighting in a public dispute with Silbert, Genesis, and DCG after FTX’s crash in November 2022. Genesis even halted all customer withdrawals in the events after the flash crash of FTX, which froze $900 million of Gemini Earn customer funds. Cameron Winklevoss even accused DCG’s owner of “conspiring to make false statements and misrepresentations to Gemini Earn users, other lenders, and the public at large about the financial health of Genesis.”
The SEC enters the battle?
The SEC cracking down on both Gemini and Genesis is not good news for the parties. Meanwhile, SEC’s actions also imply on other similar earning programs, which now can face similar action by the SEC.
Gurbir S. Grewal, Director of the SEC’s Division of Enforcement, noted that the recent Genesis’ earn program shutdown highlights the need for products and services that comply with current federal securities laws.
“As we’ve seen time and again, the failure to do so denies investors the basic information they need to make informed investment decisions. Our investigations in this space are very much active and ongoing and we encourage anyone with information about this matter or other possible securities law violations to come forward, including under our Whistleblower Program if applicable.” Grewal concluded.Cryptocurrency Regulations SEC Gemini trading cryptocurrency news crypto news SEC Security and Exchange Commission Regulation Regulations