Gemini and Genesis Hit With SEC Charge Over Gemini Earn

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• Gemini and Genesis have been hit with charges of unregulated securities sales by the SEC
• The agency says that the Gemini Earn program, which is temporarily on hold, violated securities laws
• The two companies will now be on the same side following days of verbal jousting over Gemini Earn

The war of words between Genesis and Gemini is about to take on a whole new dimension after the Securities and Exchange Commission (SEC) charged both with the sale of unregistered securities through the platform that has caused the battle in the first place. The SEC says that, through offering interest to depositors into the Gemini Earn scheme, Gemini was offering a security, with Genesis Global Capital also responsible as the entity which facilitated the earning of the interest. The lawsuit adds another layer of intrigue and will bring the two foes together to fight a common enemy.

Genesis Facilitated Gemini Earn Offering

The SEC alleges that in December 2020, Genesis, a subsidiary of Digital Currency Group, entered into an agreement with Gemini, led by Cameron Winklevoss, to offer customers the ability to loan their cryptocurrency to Genesis in exchange for interest payments. In February 2021, Genesis and Gemini launched the Gemini Earn program, allowing retail investors to lend their crypto to Genesis through Gemini as the facilitator.

Gemini also charged a fee, sometimes as high as 4.29%, from the interest earned by investors, with SEC contending that Genesis had discretion in how to use investors’ crypto assets to generate revenue and pay interest to those who participated in Gemini Earn. Genesis abruptly halted withdrawals in November as it felt the financial impact of the FTX collapse.

SEC “Late to the Game”

SEC Chair Gary Gensler in a Twitter post outlining the charges that, one again, it was protecting customers:

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.

Not everyone agrees, however. Congressman Tom Emmer argued that Gensler was, again, late to the game, taking action weeks after investors’ funds were trapped:

.@GaryGensler is once again late to the game, “protecting” no one. Quite clear that his political “regulation through enforcement” strategy hurts everyday Americans. https://t.co/shJ03Zar5p

— Tom Emmer (@RepTomEmmer) January 13, 2023

The fact that Gemini and Genesis are now suddenly on the same side in this battle following two weeks of verbal jousting will set up a very interesting sub-plot in this story.