- Genesis Global has settled charges with the SEC, agreeing to pay a $21 million civil penalty following the issues surrounding Gemini Earn
- The settlement follows allegations of unregistered securities sale through the program which was terminated in early 2023
- Investors are set to get 100% refunds after a deal was agreed last month
Genesis Global Capital has agreed to a $21 million settlement with the Securities and Exchange Commission (SEC) following charges relating to the operation of the Gemini Earn program. The SEC announced the deal yesterday which will see Genesis hit with a permanent injunction as well as the civil penalty. Genesis has been held accountable for the operation of Gemini Earn alongside Gemini itself, which utilized Genesis’ intertest-earning feature, a partnership that descended into chaos when Genesis halted withdrawals in November 2022.
Genesis Accused of Securities Violation
The charges stem from allegations that Genesis, along with Gemini, violated Sections 5(a) and 5(c) of the Securities Act of 1933, with the SEC contending that Genesis operated the Gemini Earn program as an investment opportunity, where customers, including retail investors in the United States, loaned their crypto assets with the promise of earning interest.
However, Genesis faced liquidity issues amidst market volatility in late 2022, leading to its inability to fulfill withdrawal requests from investors. This led to a running verbal battle between the owners of the two companies and the closure of Gemini Earn in January 2023.
The fallout was significant, with Genesis and two affiliates filing for Chapter 11 bankruptcy in the same month, a move that left investors unable to access or retrieve their crypto assets invested through the Gemini Earn program. Only three weeks ago was a deal reached that will allow Gemini Earn customers to get 100% of their funds returned to them.
Gensler Says Settlement is a Reminder
In a press release announcing the deal, SEC Chair Gary Gensler emphasized the importance of adherence to securities laws, noting that Genesis failed to register its crypto lending product, thus evading essential disclosure requirements meant to safeguard investors.
Gensler reiterated that compliance with securities laws is not optional, but rather a legal obligation crucial for investor protection and market trust.
