Key takeaways:
- Genesis Global Capital has entered a final court judgment to settle accusations about the Gemini Earn financing program, including paying a $21M civil penalty.
- Under the terms of the settlement, the SEC will only be paid a share of the penalty after other bankruptcy payments, including claims from retail investors, have been made.
Genesis Global Capital has entered into a final court judgment to settle accusations about the Gemini Earn financing program, including paying a $21 million civil penalty.
Following the launch of the Gemini Earn cryptocurrency lending program for ordinary investors, Genesis and Gemini were accused of conducting an unlicensed securities sale.
In a statement released on March 19, Gary Gensler, the chair of the US Securities and Exchange Commission (SEC), stated:
“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.”
Under the terms of the settlement, the SEC will only be paid a share of the penalty after other bankruptcy payments, including claims from retail investors, have been made.
The action that the SEC filed in January 2023 against Gemini and Genesis for marketing unregistered securities through the Gemini Earn program has come to a conclusion with the $21 million punishment.
According to the SEC announcement, Genesis banned user withdrawals from its platform in November 2022, when Gemini Earn had around 340,000 customers and $900 million in assets under control.
Superintendent Adrienne Harris of the New York State Department of Financial Services (NYDFS) indicated in a statement on February 28 that the fine is the result of many compliance violations “that threatened the safety and soundness of the company” and that Gemini agreed to pay a $37 million penalty for them. This agreement took place three weeks prior.
As part of the agreement between Gemini and the NYDFS, Gemini will repay clients of the Gemini Earn program at least $1.1 billion through the Genesis bankruptcy action, including the $37 million penalty.
Gemini stated that it anticipates that Earn users will get 100% of their crypto assets back plus appreciation if the bankruptcy court grants their request.
