SEC Charges Crypto Firms Gemini & Genesis for Alleged Unregistered Securities

• The U.S. Securities and Exchange Commission (SEC) has charged crypto firms Genesis and Gemini for allegedly selling unregistered securities concerning a high-yield product offered to depositors.
• The product in question, Gemini’s Earn Program, satisfied the SEC’s definition of security and was backed by Genesis’ lending activities.
• SEC Chair Gary Gensler said in a statement that the charges are meant to make it clear to the marketplace and the investing public that crypto lending platforms and other intermediaries need to comply with the SEC’s securities laws.

The U.S. Securities and Exchange Commission (SEC) issued a press release on Thursday, announcing charges against crypto firms Genesis and Gemini for allegedly selling unregistered securities in the form of a high-yield product offered to depositors. The product in question, Gemini’s Earn Program, satisfied the SEC’s definition of security and was backed by Genesis’ lending activities.

In February 2021, crypto exchange Gemini and crypto lender Genesis formed a partnership, in which Genesis loaned crypto belonging to Gemini users. Some of the profits from these loans were sent back to Gemini, and Gemini would then deduct an agent fee, which could be as high as 4%, before returning the remaining profit to its customers. According to the SEC press release, these actions constitute an offering of securities, for which registration is required.

The SEC’s complaint was filed in the Manhattan Federal Court, and SEC Chair Gary Gensler released a statement regarding the charges, saying: “Today’s charges build 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.”

The SEC’s charges against Gemini and Genesis demonstrate that the agency is serious about enforcing its securities laws in the cryptocurrency space. It is also a reminder to investors that they must be diligent in researching potential investments, to ensure that they are not engaging in any activities that could potentially violate the SEC’s rules.

The SEC’s action against Gemini and Genesis is an important step in providing greater clarity to the cryptocurrency industry, and in protecting investors. The SEC has made it clear that it is committed to ensuring that the cryptocurrency market operates in a fair and compliant manner. It is essential that investors understand the risks associated with any investment and make sure that they are complying with all relevant regulations.