SEC Charges Gemini and Genesis for Selling Unregistered Securities

• The US Securities and Exchanges Commission (SEC) has filed a charge against crypto exchange – Gemini and crypto lending platform – Genesis for offering and selling unregistered securities through Gemini’s Earn program.
• The duo is accused of violating sections 5 (a) and 5 (c) of the Securities Act of 1933.
• Genesis signed a deal with the crypto exchange in December 2020, wherein Gemini’s customers could loan their crypto to Genesis in exchange for interest.

The United States Securities and Exchanges Commission (SEC) has filed a charge against crypto exchange – Gemini and crypto lending platform – Genesis, for 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 the duo is accused of violating sections 5 (a) and 5 (c) of the Securities Act of 1933.

This move comes a few months after Gemini and Genesis signed a deal in December 2020, wherein Gemini’s customers could loan their crypto to Genesis in exchange for interest. Following this, Gemini Earn was kickstarted in February 2021, with the crypto exchange acting like an agent between Genesis and its customers. The exchange, in return, received a fee, which went up to 4.29% on returns. However, this came crumbling down after Genesis suspended withdrawals as a result of FTX’s collapse.

The program, at the time, had 340,000 users and about $900 million in assets. The money continues to remain locked and both platforms are yet to decide on a final solution. SEC Chairman – Gary Gensler – said, „Today’s action underscores the importance of compliance with the securities laws as the SEC continues to focus on the offer and sale of digital assets.“

The commission previously charged BlockFi for similar offerings. Investigations into other securities law violations and into other entities and persons relating to the alleged misconduct are ongoing.