SEC Intervenes in Genesis-Gemini Feud Suing Both Companies

On Thursday afternoon, the Securities and Exchange Commission announced it has filed a complaint against Genesis Global and Gemini Trust. The companies that are currently engaged in a public feud over Genesis’ freezing of funds on its platform are charged for unregistered crypto assets offering conducted through Gemini Earn.

SEC Charges Genesis and Gemini for Unregistered Sale Of Crypto Assets

On January 12th, the SEC announced it was charging both Genesis Global and Gemini Trust over the unregistered sale of cryptocurrencies. According to the Commission, the offering conducted through Gemini’s Earn program since February 2021, enabled the firms to raise billions of dollars while “bypassing disclosure requirements designed to protect investors”. 

We allege that Genesis and Gemini offered unregistered securities to the public, bypassing disclosure requirements designed to protect investors. Today’s charges build 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.

SEC Chair Gary Gensler

According to the complaint, the two firms violated Sections 5(a) and 5(c) of the Securities Act of 1933 and Gemini Earn constitutes an offer and sale of securities that should have been registered with the watchdog. The SEC is seeking civil penalties, disgorgement of ill-gotten gains plus prejudgment interest, and permanent injunctive relief.

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What is the Genesis-Gemini Feud About?

Both Genesis and Gemini came to the height of public attention in the wake of the collapse of FTX. On November 16th, Genesis’ lending arm froze withdrawals from its platform prompting Gemini Earn, a major business partner, to do the same later on the same day. The time withdrawals were halted, Gemini held more than $3 billion in users’ deposits with at least $900 million of the amount being stuck on Genesis.

Since then, Genesis entered into restructuring and hasn’t yet ruled out bankruptcy as an option. For its part, Gemini promised increased transparency to its embattled Earn customers. The issue came to a boiling point in early January when Gemini’s Cameron Winklevoss published an open letter calling on Barry Silbert to repay Genesis’ debts and offering an ultimatum and a deadline.

After the deadline of January 8th passed, Gemini announced that it had terminated the MLA agreement with Genesis and the Earn Program. While Barry Silbert offered a reassuring Shareholder letter on January 10th attempting to distance his DCG—the company that owns Genesis—from the issue, several days later reports came out indicating that the conglomerate was seeking to sell its crypto assets to cover the $3 billion debt to clients.

How will the complaint affect the embattled Gemini Earn customers? Tell us what you think in the comments below.