SEC Charges Gemini & Genesis for Selling Unregistered Securities

• The SEC has filed a charge against crypto exchange Gemini and crypto lending platform Genesis, accusing them of offering and selling unregistered securities through Gemini’s Earn program.
• The complaint was filed in the U.S. District Court for the Southern District of New York, and both companies are charged for violating sections 5 (a) and 5 (c) of the Securities Act of 1933.
• This action follows the fallout between the two firms over Gemini’s Earn program, which was launched in February 2021 and had 340,000 users and around $900 million in assets.

Today, the United States Securities and Exchanges Commission (SEC) filed a charge against crypto exchange – Gemini and crypto lending platform – Genesis in the U.S. District Court for the Southern District of New York. The commission alleged that the two firms violated sections 5 (a) and 5 (c) of the Securities Act of 1933 by offering and selling unregistered securities through Gemini’s Earn program.

The charge follows a public fallout between the two companies which began after the launch of Gemini’s Earn program in February 2021. The program allowed users to loan their crypto to Genesis in exchange for interest, while Gemini received a fee for acting as an agent between Genesis and its customers. The program had 340,000 users and around $900 million in assets at the time, however, the money continues to remain locked after Genesis suspended withdrawals as a result of FTX’s collapse.

SEC Chairman Gary Gensler commented on the charge, saying, „Today’s action shows that the SEC is committed to enforcing the securities laws with those who offer digital asset securities, regardless of the underlying asset.“ He further added, „We will continue to focus on protecting investors from those who fail to comply with the securities laws when they offer digital asset securities.“

The commission’s press release also stated that investigations into other securities law violations, and into other entities and persons relating to the alleged misconduct, are ongoing. It remains to be seen how the firms will respond to the charge and if they will be able to come to a satisfactory solution for the customers that are currently locked out of their assets.

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