Gemini and Genesis Hit With SEC Charges for Earn Program Violations

According to a Jan. 12 release, the Securities and Exchange Commission has charged Genesis and Gemini over their now-defunct Gemini Earn program.

SEC Chair Gary Gensler said:

We allege that Genesis and Gemini offered unregistered securities to the public, bypassing disclosure requirements designed to protect investors. Today’s charges build on previous actions to make clear… that crypto lending platforms and other intermediaries need to comply with our time-tested securities laws.

Then, in November 2022, Genesis compelled a halt to Earn withdrawals, citing a lack of liquidity brought on by market circumstances at the time of FTX’s demise. According to the SEC, 340,000 Gemini Earn members’ crypto assets, valued at $900 million, were held by Genesis Earn at the time withdrawals were halted. This topic has generated a lot of debate in recent months, and it was included in the SEC’s complaint today.

However, the SEC also called attention to dubious actions taken by Gemini while the service was in use. Gemini reportedly received an agency fee as high as 4.29%, according to the regulator.

Additionally, it claimed that because the Earn agreement did not specify how investor assets may be utilized, Gemini combined investor Earn monies with other funds and invested those funds at its discretion.

Per federal securities regulations, it seems from the SEC’s lawsuit that the Gemini Earn agreements were not registered with the SEC. Additionally, it claims that Gemini and Genesis provided “selective and inadequate disclosures” and that the two businesses marketed Gemini Earn as an investment to the general public.

The SEC wants to stop the two firms from breaking certain securities laws in the future. It also seeks the disgorgement or surrender of the two corporations’ ill-gotten gains as well as the payment of interest and penalties on those gains. The amount that Genesis and Gemini may owe the SEC is not specified in today’s filing. Additionally, it doesn’t specify precisely which services, if any, the two businesses may be prohibited from providing.

Users of Earn had been unable to withdraw their money for the past two months, and on Tuesday, the service was formally and permanently terminated. It’s uncertain whether the SEC’s measures will enable people to get their money back.

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