SEC Charges Gemini and Genesis With Offering Unregistered Securities to Retailers

• The US Securities and Exchange Commission (SEC) has charged crypto exchange Gemini and crypto lender Genesis Global Capital, a subsidiary of Digital Currency Group (DCG), with offering unregistered securities to retail investors.
• The SEC alleged that the companies raised billions of dollars’ worth of crypto assets from hundreds of thousands of investors through the unregistered offering.
• The two companies offered the Gemini Earn cryptocurrency lending program to retail investors between February 2021 and November 2022, with more than 50 crypto assets eligible to be invested.

The US Securities and Exchange Commission (SEC) has brought charges to crypto exchange Gemini and crypto lender Genesis Global Capital, a subsidiary of Digital Currency Group (DCG). The SEC alleges that the two companies offered unregistered securities to retail investors, raising billions of dollars’ worth of crypto assets from hundreds of thousands of investors.

The SEC states that in December 2020, Genesis and Gemini entered into an agreement to offer Gemini customers, including retail investors in the U.S., an opportunity to loan their crypto assets to Genesis in exchange for interest. This program was known as the Gemini Earn cryptocurrency lending program. According to the SEC, more than 50 crypto assets were eligible to be invested in the Gemini Earn program, including bitcoin, ether, USD Coin, and dogecoin.

The SEC goes on to explain the process of the Gemini Earn program. Investors were required to tender their crypto assets to Genesis, with Gemini acting as the agent to facilitate the transaction. Genesis then exercised its discretion in how to use investors‘ crypto assets, as well as how and when to return them, without investors’ prior consent or approval. The SEC also noted that the offering was offered to retail investors between February 2021 and November 2022, and thus it was not registered with the SEC.

The SEC’s investigation into the matter is ongoing, and the regulator is seeking a court order to require Gemini and Genesis to provide a full accounting of the crypto assets collected and returned, as well as to pay disgorgement, prejudgment interest, and a civil penalty. In response to the charges, Cameron Winklevoss, co-founder and CEO of Gemini, released a statement calling the SEC’s lawsuit “super lame”.