Genesis has agreed to pay a $21 million civil penalty to the Securities and Exchange Commission (SEC) for the unregistered offer and sale of securities.
The SEC charged Gemini and Genesis’ crypto asset lending program, Gemini Earn, in January 2023.
According to the SEC’s filing, in November 2022, Genesis announced that it would not allow the Gemini Earn investors to withdraw their crypto assets because Genesis lacked sufficient liquid assets to meet withdrawal requests following volatility in the crypto asset market.
At the time, Genesis held approximately $900 million in crypto assets from 340,000 Gemini Earn investors.
After being charged, Genesis filed for bankruptcy.
Gemini recently agreed to pay $1.1bn to Gemini Earn customers for their part in the partnership.
“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,” said SEC chair Gary Gensler. “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.”
“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,” said Gurbir S. Grewal, director of the SEC’s Division of Enforcement. “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.”