Genesis Global Agrees to $21 Million Settlement with SEC
Crypto lender Genesis Global has reached a settlement with the US Securities and Exchange Commission (SEC) that includes a $21 million civil penalty and a permanent injunction. The settlement resolves charges against Genesis related to the unregistered offer and sale of securities through its crypto asset lending program, the Gemini Earn program.
Details of the Settlement
The SEC’s investigation found that Genesis engaged in the unregistered offer and sale of securities by operating the Gemini Earn program without proper registration. The program allowed Gemini customers, including retail investors in the United States, to loan their crypto assets to Genesis in exchange for promised interest payments.
- Genesis announced in November 2022 that it could not honor withdrawal requests due to a lack of sufficient liquid assets following volatility in the crypto market.
- The company held approximately $900 million in crypto assets from 340,000 Gemini Earn investors at that time.
As part of the settlement, Genesis has agreed to pay a $21 million civil penalty. However, the SEC will only receive its portion of the penalty after all other allowed claims, including those by retail investors in the Gemini Earn program, have been paid in the bankruptcy court.
Genesis and two of its affiliates filed for voluntary Chapter 11 bankruptcy on January 19, 2023, in the US Bankruptcy Court for the Southern District of New York.
Importance of Compliance with Securities Laws
SEC Chair Gary Gensler emphasized the importance of compliance with securities laws by crypto lending platforms and intermediaries. He stated that failing to register such products and bypassing disclosure requirements is not optional but a legal obligation. Gensler 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.”
Gurbir S. Grewal, Director of the SEC’s Division of Enforcement, also stressed that no hype or advertising can substitute for the investor protection disclosures required by securities laws.
Separate Lawsuit Settlement
Genesis has also settled a separate lawsuit filed by New York Attorney General Letitia James. The lawsuit initially targeted Genesis, Digital Currency Group, and Gemini, accusing them of defrauding customers of $1.1 billion. However, the settlement disclosed in the New York bankruptcy court focuses solely on Genesis.
Market Impact
As of the time of writing, the total value of the cryptocurrency market has experienced a 6% decline, reaching a valuation of $2.31 trillion. Bitcoin (BTC), the leading cryptocurrency in the market, has undergone a 6.6% price correction, decreasing towards the $63,000 price level.
Hot Take: Genesis Global Settles With SEC for $21 Million
Crypto lender Genesis Global has reached a settlement with the SEC over charges related to its unregistered offer and sale of securities through its Gemini Earn program. The settlement includes a $21 million civil penalty and a permanent injunction.
The SEC’s investigation found that Genesis operated the Gemini Earn program without proper registration, allowing retail investors to loan their crypto assets in exchange for promised interest payments. However, when faced with volatility in the crypto market, Genesis was unable to honor withdrawal requests due to a lack of sufficient liquid assets.
The settlement emphasizes the importance of compliance with securities laws by crypto lending platforms and intermediaries. SEC Chair Gary Gensler stated that compliance is not optional but a legal obligation, and failing to register products and bypass disclosure requirements puts investors at risk.
Genesis has also settled a separate lawsuit filed by the New York Attorney General, focusing solely on the company. The total value of the cryptocurrency market has experienced a decline, with Bitcoin undergoing a price correction.
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