Defunct cryptocurrency trading desk Genesis Global Capital will pay a $21 million penalty to settle charges brought by the Securities and Exchange Commission (SEC) pertaining to unregistered securities offerings via the Gemini Earn platform.
Genesis, which was owned by the Digital Currency Group until going bust in 2023, partnered with the Winklevoss Twin-owned cryptocurrency exchange Geminin to offer interest-yielding staking services.
Genesis defaulted on approximately US$1 billion worth of loans in November 2022, leaving over 200,000 Earn customers out of pocket.
"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 SEC chair Gary Gensler. “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.”
“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,” said Gurbir S. Grewal, director of the SEC’s Division of Enforcement. “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.”
As part of the settlement, Genesis will also face a permanent injunction for violating federal securities laws.
Gemini, in February, agreed to repay 100% of the customer funds totalling $1.1 billion lost due to the implosion of the Earn platform.
Under the terms of the Genesis 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”.