Genesis Agrees to Pay $21 Million Penalty in SEC Settlement
Genesis has agreed to pay a civil penalty of $21 million and submit to a permanent injunction as part of a settlement with the U.S. Securities and Exchange Commission (SEC).
According to a recent press release, the settlement resolves charges that Genesis engaged in the unregistered offer and sale of securities through its crypto asset lending program, known as the Gemini Earn program.
Key points:
- Genesis agrees to pay a $21 million civil penalty and accepts a permanent injunction.
- The charges arise from Genesis’ failure to register its retail crypto lending product before offering it to the public.
- The collapse of the Gemini Earn program exposed investors to unknown risks due to non-compliance with federal securities laws.
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SEC Chair Gary Gensler emphasized the importance of compliance with securities laws, stating, “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.”
Genesis announced that Gemini earn investors can’t withdraw crypto
The SEC’s complaint alleged that the Gemini Earn program allowed Gemini customers to loan their crypto assets to Genesis in exchange for interest earned from Genesis’ use of the loaned assets.
However, in November 2022, Genesis announced that it would not allow Gemini Earn investors to withdraw their crypto assets due to a lack of sufficient liquid assets following volatility in the crypto asset market. At that time, Genesis possessed approximately $900 million worth of crypto assets from 340,000 investors utilizing Gemini Earn.
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Genesis and two of its affiliates submitted voluntary Chapter 11 petitions in the U.S. Bankruptcy Court for the Southern District of New York on January 19, 2023. Also, this left investors unable to access or withdraw the crypto assets they had invested through the Gemini Earn program.
The settlement between the crypto lending platform and the SEC serves as a reminder of the importance of regulatory compliance in the cryptocurrency industry.
