Genesis Global Capital, LLC is set to pay a $21 million civil penalty following a complaint from the Securities and Exchange Commission (SEC) which claimed that the firm “engaged in the unregistered offer and sale of securities through a crypto asset lending program known as the Gemini Earn program”.
Gary Gensler
Gurbir Grewal, director of the SEC’s division of enforcement, said: “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 […] no amount of hype and advertising can substitute for the investor-protection disclosures required by the federal securities laws.”
The final judgment order means that the SEC will not receive any portion of the penalty until payment of all other allowed claims by the bankruptcy court have been completed.
The Gemini Earn program claimed to be an investment opportunity wherein Gemini customers, loaned their crypto assets to Genesis under the expectation that the firm would pay interest earned from its use of the loaned crypto assets.
However, in November 2022, Genesis stated that Gemini Earn investors (approximately 340,000) would not be allowed to withdraw their crypto assets due to Genesis lacking sufficient liquid assets to meet the requests. The firm but this down to the volatility in the crypto asset market. At that time, Genesis held around $900 million in crypto assets.
Following this, Genesis and two of its affiliates filed for voluntary bankruptcy.
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Speaking to the settlement, Gary Gensler, chair of the SEC, said: “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.”