Genesis has Accepted to pay a $21 million civil penalty to SEC to settle charges related to the Gemini Earn Program.
Takeaway Points
- Genesis has Accepted to pay a $21 million civil penalty to the SEC to settle charges related to the Gemini Earn Program.
- This was announced by the SEC in their press release.
- Genesis and Gemini Trust Company, LLC (“Gemini”) was charged by the SEC on January 12, 2023.
SEC Final Judgment
The Securities and Exchange Commission announced on Tuesday that Genesis Global Capital, LLC, has accepted the final judgment to pay a $21 million civil penalty related to the Gemini Earn Program.
According to the press release, SEC will not receive any portion of the penalty until after all other payment claims by the bankruptcy court and claims by investors in the Gemini Earn Program have been made.
Gary Gensler, Chair of the Securities and Exchange Commission, said that Genesis was charged because it failed to register the crypto product before presenting it to the public.
“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,” said Gary.
He added that “Today’s settlement builds on previous actions to make clear to the marketplace and the investing public that crypto lending platforms and other intermediaries need to comply with our time-tested securities laws. Doing so best protects investors. It promotes trust in markets. It’s not optional. It’s the law.”
Director of the SEC’s Division of Enforcement, Gurbir S. Grewal, explained that the fall of the crypto program shows the unknown risks that investors face when the market fails to follow the federal securities laws.
“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. 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.” He said.
The Charges
Genesis and Gemini Trust Company, LLC (“Gemini”) was charged by the SEC on January 12, 2023. According to the report, the SEC complained that the Gemini Earn program was supposed to be an investment opportunity where Gemini customers, including retail investors in the United States, loaned their crypto assets to Genesis in exchange for Genesis’ promise to pay interest earned from Genesis’ use of the loaned crypto assets. The complaint alleges that, in November 2022, Genesis announced that it would not allow the Gemini Earn investors to withdraw their crypto assets because Genesis lacked sufficient liquid assets to meet withdrawal requests following volatility in the crypto asset market. At the time, Genesis held approximately $900 million in crypto assets from 340,000 Gemini Earn investors.
The SEC’s complaint, filed in the U.S. District Court for the Southern District of New York, charged Genesis and Gemini with violating Sections 5(a) and 5(c) of the Securities Act of 1933. In addition to the civil penalty referenced above, Genesis, without admitting or denying the allegations in the SEC’s complaint, consented to the entry of a final judgement permanently enjoining Genesis from violating Section 5 of the Securities Act.
People Who Conducted the Investigation
According to the report, the SEC’s investigation was conducted by Jonathan Austin and Ashley Sprague and supervised by Deborah Tarasevich and Stacy Bogert. The litigation in the bankruptcy court was conducted by Therese Scheuer and William Uptegrove and supervised by Alistaire Bambach. The ongoing district court litigation against Gemini is being led by Edward Reilly and Laura Meehan and supervised by James Connor and Olivia Choe.
