SEC charges Genesis and Gemini with selling unregistered securities

SEC Chairman Gary Gensler testifies before a hearing of the Senate Banking, Housing and Urban Affairs Committee on September 14, 2021 in Washington.

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The Securities and Exchange Commission on Thursday accused crypto firms Genesis and Gemini of allegedly selling unregistered securities in connection with a high-yield product offered to depositors.

Gemini, a crypto exchange, and Genesis, a crypto lender, partnered in February 2021 on a Gemini product called Earn, which offered yields of up to 8% for customers.

According to the SEC, Genesis loaned out Gemini users’ crypto and sent a portion of the profits back to Gemini, which then deducted agent fees, sometimes as much as 4%, and returned the remaining profits to its users. SEC officials said Origin should have registered that product as a securities offering.

SEC Chairman Gary Gensler said in a statement, “Today’s charges build on past actions to clarify to the market and the investing public that crypto lending platforms and other intermediaries are required to comply with our time-tested securities laws.” Needed.”

SEC officials said that Gemini’s Earn Program, supported by Genesis’ lending activities, meets the SEC’s definition by including both an investment contract and a note. Those two characteristics are part of how the SEC evaluates whether an offering is a security.

The regulators are seeking permanent injunctive relief, disgorgement and civil penalties against both Genesis and Gemini.

both companies are engaged in a high-profile fight More than $900 million in customer assets that Gemini assigned to Genesis as part of the Earn program were closed this week.

Gemini, which was founded in 2015 by Bitcoin Advocates Cameron and Tyler Winklevoss own an extensive exchange business that, if troubled, could potentially face an enforcement action.

But Genesis’ future is more uncertain, as the business is heavily focused on lending customer crypto and has already hired restructuring advisors. The crypto lender is a unit of Barry Silbert’s Digital Currency Group.

SEC officials said the possibility of DCG or Genesis bankruptcy had no bearing on its decision whether to pursue the charge.

This is the latest in a series of recent crypto enforcement actions led by Gensler following the collapse of Sam Bankman-Fried’s FTX in November. Gensler was widely criticized on social media and by MPs For the SEC’s failure to enforce safeguards on the nascent crypto industry.

Gensler’s SEC and the Commodity Futures Trading Commission, headed by Rostin Benham, are the two regulators that oversee crypto activity in the US. enforcement action.

The SEC has now taken a similar action against bankrupt crypto lender BlockFi and Settled Last year. Earlier this month, coinbase Settled Historically inadequate Know Your Customer protocol with New York State regulators.

Since Bankman-Fried was indicted on federal fraud charges in December, the SEC has filed five crypto-related enforcement actions.

This is breaking news. check back for updates,

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