Genesis agrees to $21m SEC settlement

Genesis Global Capital will not pay the $21m penalty for its Gemini Earn lending program until after payment of other allowed bankruptcy claims.

Cryptocurrency brokerage Genesis Global Capital has agreed to pay a $21m civil penalty in relation to its Gemini Earn lending program.

The fine settle US Securities and Exchange Commission (SEC) charges that Genesis engaged in the unregistered offer and sale of securities through the program.

Genesis and two affiliates filed voluntary Chapter 11 petitions in the US Bankruptcy Court for the Southern District of New York on January 19, 2023. Investors have been unable to access or withdraw the crypto assets they invested with Genesis via Gemini Earn.

Under the terms of the settlement, the SEC will not receive any portion of the penalty until after payment of all other allowed claims by the bankruptcy court, including claims by retail investors in the Gemini Earn program.

“We charged Genesis with failing to register its retail crypto lending product before offering it to the public, bypassing essential disclosure requirements designed to protect investors,” SEC chair Gary Gensler said.

He added that the settlement builds on previous actions regarding crypto firms and their obligation to comply with securities laws. “Doing so best protects investors. It promotes trust in markets. It’s not optional. It’s the law,” Gensler said.

The SEC charged Genesis and Gemini Trust Company on January 12, 2023. According to the complaint, the Gemini Earn program was a purported investment opportunity where Gemini customers, including retail investors in the US, loaned their crypto to Genesis in exchange on the understanding that they would earn interest.

The complaint alleges that, in November 2022, Genesis announced that it would not allow Gemini Earn investors to withdraw their crypto assets because it lacked sufficient liquid assets to meet withdrawal requests following volatility in the crypto asset market. At the time, Genesis held approximately $900m in crypto assets from 340,000 investors.

“The collapse of the Gemini Earn program underscores the unknown risks that investors are exposed to when market participants fail to comply with the federal securities laws,” SEC Division of Enforcement director Gurbir Grewal said.

“As this enforcement action makes clear, no amount of hype and advertising can substitute for the investor-protection disclosures required by the federal securities laws.”

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Written by Hannah

Hannah is editor of and has almost 15 years experience in journalism, including reporting on law, TV, gambling, crypto and alternative finance. She is particularly interested in the future of money, the transition of gambling from 'vice' industry to mainstream entertainment and the application of blockchain technology to wider society.

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