The “Earn” cryptocurrency lending program, a partnership between the Gemini exchange and crypto lending company Genesis Global Capital, remains at the center of discussions in the market. This time, the clash over the program, which was terminated last week by Gemini after Genesis suspended withdrawals, caught the attention of the United States Securities and Exchange Commission, the SEC. According to the regulator, companies offered unregistered securities to retail investors through Earn. “Through this unregistered offering, Genesis and Gemini raised billions of dollars worth of crypto assets from hundreds of thousands of investors. Investigations into other violations of securities law and other entities and persons related to the alleged misconduct are ongoing,” the SEC said.
About Earn by Gemini and Genesis
As highlighted by the SEC, Genesis, which is part of the Digital Currency Group (DCG), entered into an agreement in December 2020 with Gemini to offer exchange customers the service of lending cryptocurrencies to Genesis in exchange for interest. The Earn program was launched in February 2021. Everything was going well until in November 2022, Genesis suspended withdrawals on its platform. The action also affected investor withdrawals from Gemini Earn. This was because the company lacked the liquidity to meet withdrawal requests that intensified after the FTX collapse. In all, Genesis held about $900 million in assets from 340,000 Gemini Earn investors. Given this, and the lack of a deal with Genesis, Gemini ended the Earn program earlier this month. At the same time, it ended its partnership with Genesis. But to date, Earn’s retail investors still haven’t been able to cash out their digital assets. Gemini co-founder Cameron Winklevoss has sharply criticized Barry Silbert’s DCG, accusing the company of defrauding thousands of users. In addition, he asked for Silbert to leave the DCG – something that did not happen.
SEC seeks injunctive relief, earnings restitution
Amid these allegations, an SEC official said that both Genesis and Gemini engaged in activities that constituted the offering and sale of securities without registration. “Today’s charges build on past actions to make clear to the market and the investing public that crypto-lending platforms and other intermediaries need to comply with our securities laws,” SEC Chairman Gary Gensler said in a note. “Doing so better protects investors, promotes confidence in markets, it’s not optional, it’s the law.” With the action, the SEC is seeking permanent injunctive relief, restitution of ill-gotten gains, in addition to prepaid interest and civil penalties. In addition, the regulator seeks to prevent Genesis and Gemini from committing future securities violations.
Tyler Winklevoss of Gemini criticizes SEC action
Tyler Winklevoss, the other co-founder of Gemini, said he was disappointed with the SEC’s decision. This is because, according to him, the action “does not contribute anything to efforts to help Earn users recover their assets”.
2/ As a matter of background, the Earn program was regulated by the @NYDFS and we’ve been in discussions with the SEC about the Earn program for more than 17 months. They never raised the prospect of any enforcement action until AFTER Genesis paused withdrawals on November 16th. —Tyler Winklevoss (@tyler) January 12, 2023
“By the way, the Earn program has been regulated by the NYDFS and we have been in discussions with the SEC regarding the Earn program for over 17 months. They never raised the prospect of any enforcement action until AFTER Genesis halted withdrawals on November 16th.” He further emphasized that despite these ongoing conversations, the SEC has chosen “to announce its lawsuit to the press prior to notifying us.” Also read: Cardano: DeFi Ecosystem Grows 36% in Early 2023 Read Also: Hong Kong CVM Will Allow General Trading of Bitcoin and “Highly Liquidity” Cryptocurrencies Read Also: Bitcoin Hits $18,900 and Could Be Close to New Level resistance. ETH, ADA, DOGE, SOL, AXS, FLOW and STEPN surge up to 14%