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Genesis Settles With SEC For $21 Million Over Gemini Earn, but What Does This Mean for Crypto Lenders?

Last Updated March 20, 2024 8:35 AM
Teuta Franjkovic
Last Updated March 20, 2024 8:35 AM
By Teuta Franjkovic
Verified by Peter Henn

Key Takeaways

  • Genesis Global Capital settles with the SEC for $21 million over unregistered securities offered through the Gemini Earn.
  • The collapse of FTX triggered financial woes for Genesis, affecting withdrawal processes and loans.
  • A New York judge upholds the SEC’s claim that Gemini and Genesis likely violated securities laws.

Genesis Global Capital has reached a settlement  with the United States Securities and Exchange Commission (SEC), agreeing to pay $21 million to settle accusations related to the Gemini Earn program.

This settlement marks a significant development in the SEC’s case against both Genesis and Gemini.

Genesis Settles for $21 Million: Unregistered Crypto Lending in the Spotlight

Genesis agreed to both its fine and a permanent injunction for engaging in the sale of unregistered securities. The  settlement was approved by a federal court in New York on Monday, effectively concluding the legal battle.

The SEC will receive the penalty once the bankruptcy court declares that all claims, including those from retail investors in the Gemini Earn program, have been fully satisfied.

According to  SEC’s head Gary Gensler:

“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.”

The downfall of the Gemini Earn program highlights  the unforeseen risks investors face when market participants do not adhere to federal securities laws, according to Gurbir S. Grewal, Director of the SEC’s Division of Enforcement. He said the action shows how hype and advertising cannot replace the necessary investor-protection disclosures mandated by federal securities laws.

 A Fine Can’t Erase Wider Crypto Lending Fallout

The news marks an end to one chapter for Genesis and Gemini Earn, but their impact on global markets persists.

The collapse of FTX triggered a series of financial problems for Genesis, leading to a halt in withdrawals, repayments, and new loans. Similarly, Gopax, a South Korean cryptocurrency exchange affiliated with Genesis, faced withdrawal issues in its GoFi earn program.

The SEC initiated charges against Genesis and the Gemini Trust in January last year, following the bankruptcy of the company.

Furthermore, in the wake of the bankruptcy, Gemini, a New York-based cryptocurrency exchange, committed to reimbursing customers of its Earn program with digital assets worth approximately $1.1 billion.

Crypto Lenders Feel the Heat

The Genesis Global Capital settlement with the SEC underlines the regulatory scrutiny facing crypto lenders.

This settlement, conditional on Genesis fully repaying customers amid bankruptcy proceedings, highlights the legal and financial challenges for crypto lending entities.

It illustrates the SEC’s enforcement against the sale of unregistered securities and signals to other crypto lenders the importance of compliance with securities laws.​

 Gemini Earn Program Faces Trial for Unregistered Securities

Last week, Federal Judge Edgardo Ramos ruled on the Gemini Earn program. Judge Ramos stated  that the SEC has “plausibly alleged” that both Gemini and Genesis Global Capital violated securities laws.

This ruling by a New York court validates the SEC’s allegations against Gemini and Genesis Global Capital. According to Judge Ramos, the cases concerning the companies’ involvement in offering unregistered securities through the Gemini Earn program are sufficiently distinct to proceed.

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