The Securities and Exchange Commission has filed fresh charges against Genesis and Gemini that center upon the troubled Gemini Earn program.
The corporations “raised billions of dollars’ worth of crypto assets from hundreds of thousands of investors,” according to the SEC’s announcement of the allegations in Gemini Earn, which it describes as an unregistered offering that qualifies as the sale of securities to regular investors.
“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 the announcement. “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.”
He continued: “Doing so best protects investors. It promotes trust in markets. It’s not optional. It’s the law.”
Some people on Crypto Twitter questioned the SEC’s announcement’s timeliness and the length of time it took to look into and denounce the Earn scheme. Others disagree, arguing that the SEC was correct in identifying the Earn program as unregistered securities.
Others targeted Gary Gensler, the head of the SEC, whom many have accused of punishing certain cryptocurrency firms while being “cozy” with others, notably the defunct cryptocurrency exchange FTX, and of enforcing regulations rather than regulating.
Gemini’s Earn program, which was introduced in February 2021, advertised that it would enable users to earn up to 7.4% APY on cryptocurrency. The exchange warned users of probable withdrawal troubles in November 2022, and Genesis stated it would stop client withdrawals on the same day crypto broke. Genesis cited the effect of FTX’s failure on November 11 as the reason for this decision.
Cameron Winklevoss, a co-founder of Gemini, posted an open letter on January 2, 2023, to Genesis owner DCG and Barry Silbert, the company’s founder and CEO, criticizing what he called evasive actions taken by the two parties.
Winklevoss claimed in his letter that Gemini had repeatedly attempted to reach “a consensual conclusion” to the conflict with Genesis and DCG about the return of user funds but claimed that Silbert and his DCG had complicated matters.
The U.S. District Court for the Southern District of New York received the SEC’s lawsuit. It requests civil fines, prejudgment interest, disgorgement of ill-gotten earnings, and permanent injunctive relief.