The US Securities and Exchange Commission has filed charges against crypto lenders Gemini and Genesis for selling unregistered securities through Gemini’s “Get” scheme.
The SEC alleges that Earn enabled Genesis and Gemini to obtain billions of dollars from hundreds of thousands of investors through these unregistered offerings.
Genesis and Gemini partnership
Earn was introduced by Gemini in February 2021 and remains operational until January 8 of the following year.
As a result of the partnership with the cryptocurrency lender and subsidiary of the Digital Currency Group (DCG), Genesis, Gemini customers are given the opportunity to get results by lending cryptocurrency to companies that make the market.
The SEC said that the company abused its business model by offering up to 8% advertising revenue to clients without registering as a lending partnership with the appropriate authorities.
According to an open letter written by Gemini Earn co-founder Cameron Winklevoss, Genesis owes $900 million to 340,000 Gemini Earn users.
Genesis Withdrawals and SEC Crackdown
When the FTX turmoil sent shockwaves through the crypto market last year, Genesis paused withdrawals on the platform due to insufficient liquidity.
“U.S. retail investors who participated in the Gemini Earn program suffered significant harm,” the SEC said. About 340,000 investors lost their funds due to the withdrawal freeze.
“Today’s charges build on previous actions to make it clear to the market and the investing public that crypto lending platforms and other intermediaries must comply with time-tested securities laws,” said SEC chairman Gary Gensler.
Gemini Founders Mark SEC Action As ‘Counterproductive’
At answer As for the SEC’s charges against the crypto exchange, Cameron Winklevoss defended the company by claiming that the exchange is working hard to return investors’ funds and called the SEC’s actions “super lame” and “counterproductive.”
“As background, the Earn program is administered by @NYDFS and we’ve been in discussions with the SEC about the Earn program for over 17 months. They never raised the prospect of any enforcement action until AFTER Genesis paused withdrawals on November 16,” said Tyler Winklevoss.
According to the co-founder, Gemini will defend itself against the SEC’s claims described as “parking tickets.” And to complete his defense, Tyler praised Bitcoin and wrote this:
7 / Oh, and on a more positive note, bitcoin hit 19k today! Advanced!
— Tyler Winklevoss (@tyler) January 12, 2023
The crackdown on Gemini and Genesis means the SEC is taking preventative measures to prevent scams like FTX from happening again.
Meanwhile, the SEC is also looking into whether the company or other people are related to the alleged wrongdoing, as well as whether there are other violations of securities laws.
-Cover image from Pixabay and Bitcoin chart from Tradingview.com.