SEC Charges Gemini and Genesis for Selling Unregistered Securities

• The US Securities and Exchange Commission (SEC) has filed charges against Gemini and Genesis accusing the two of selling unregistered securities through the Gemini Earn product.
• Gemini introduced the Gemini Earn product in February 2021 and the product ran until January 8 2022.
• At the same time, Gemini had a partnership with Genesis, which is a subsidiary of Digital Currency Group (DCG). The partnership allowed Gemini customers to earn yield by lending their crypto assets to Genesis.

The US Securities and Exchange Commission (SEC) has filed charges against the cryptocurrency exchanges Gemini and Genesis, accusing them of selling unregistered securities through their joint product Gemini Earn.

Gemini Earn is a digital asset lending platform that was introduced by Gemini in February 2021. The product allowed Gemini customers to lend their crypto assets to Genesis and earn yield on the deposited assets. Unfortunately, the SEC believes that the two firms misrepresented their business model by advertising returns of up to 8% to clients without first registering the partnership as a lending partnership with the relevant authorities.

Moreover, Genesis found itself in turmoil after the FTX’s collapse and eventually had to pause withdrawals due to liquidity issues. This further added to the SEC’s suspicions that Gemini and Genesis were not following the proper regulations for a lending partnership.

In addition, the SEC has also accused Gemini and Genesis of failing to properly disclose the risks associated with the lending partnership. The SEC believes that Gemini and Genesis should have provided investors with more information about the risks associated with lending their crypto assets and the fact that the partnership was not registered with the SEC.

The SEC has now filed charges against the two companies and is seeking to impose fines and other sanctions. It remains to be seen how this case will play out, but it is clear that the SEC is taking a hard line on unregistered securities and making sure that all companies adhere to the relevant regulations.

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