Genesis has reached an agreement to pay a $21 million civil penalty to the Securities and Exchange Commission (SEC) for the unregistered offer and sale of securities.
In January 2023, the SEC took action against Gemini and its crypto asset lending program, Gemini Earn. The SEC’s filing revealed that in November 2022, Genesis announced a halt on withdrawals for Gemini Earn investors due to insufficient liquid assets, a situation that arose following volatility in the crypto market. At that time, Genesis held approximately $900 million in crypto assets for around 340,000 Gemini Earn investors.
Following the charges, Genesis filed for bankruptcy. In response, Gemini has agreed to compensate customers of Gemini Earn, committing to pay $1.1 billion as part of their partnership obligations.
SEC Chair Gary Gensler stated, “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. Today’s settlement builds on previous actions to clarify to the marketplace and the investing public that crypto lending platforms and other intermediaries need to comply with our established securities laws. Doing so best protects investors. It promotes trust in markets. It’s not optional. It’s the law.”
Gurbir S. Grewal, director of the SEC’s Division of Enforcement, emphasized the risks investors face when market participants do not adhere to federal securities laws, noting, “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.”