The SEC sets sights on Gemini and Genesis for selling unregistered securities [74]

In its newest lawsuit, the Securities and Exchange Commission has targeted Gemini and Genesis

The U.S. Securities and Exchange Commission has set its sights on crypto exchange Gemini and crypto lender Genesis alleging that both have sold unregistered securities in a lawsuit it filed last week.

In the lawsuit, the regulator took umbrage at Gemini Earn, the yield-earning product of Gemini, which was formed in partnership with Genesis in February 2021. The product touted potential yields of up to 8% on crypto deposited by customers.

According to the SEC, Genesis loaned Gemini users’ crypto and sent a portion of the profits back to Gemini, which then deducted a fee, sometimes over 4%, and returned the remaining profit to the users. However, this should have been registered as a security, which brought the lawsuit.

“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,” SEC chair Gary Gensler said.

Tyler Winklevoss, co-CEO of Gemini, went on Twitter to decry the action stating that Earn is regulated by NYDFS and that the company has “been in discussions with the SEC” for more than 17 months and never raised the issue of enforcement until after Genesis paused withdrawals on Nov. 16.

He called it a “manufactured parking ticket” and vowed to defend against it noting that there shouldn’t be any sense of urgency here as the Earn program has been shut down for almost two months.

He added that it is also entirely counterproductive as currently Gemini, and other creditors, are attempting to get funds back from Genesis, which is facing troubles after the collapse of the crypto exchange FTX.

“It’s disappointing that the @SECGov chose to file an action today as @Gemini and other creditors are working hard together to recover funds,” Tyler Winklevoss wrote. “This action does nothing to further our efforts and help Earn users get their assets back. Their behavior is totally counterproductive.”

It’s another sign of how hard it is to navigate crypto financial regulations in general. As you well know I’ve been a victim of this myself. Both state and federal regulators can’t even come to an agreement on how to do their paperwork and being okay with one doesn’t mean that you are okay with the other.

We should never be in a position where an individual can go to prison over failing to fill out a piece of paper properly. Now, these are big businesses and they have lawyers and accountants that they can hire to keep them on the right side of the law, and even if they can’t stay in compliance, something is going wrong.

This is the most recent enforcement action by the SEC following a similar action by the regulator against now-bankrupt lender BlockFi last year. The SEC is also charged Sam Bankman-Fried, now-disgraced former CEO of FTX with five additional charges on top of the criminal charges he is facing regarding the collapse of his crypto empire.

As usual, keep reading for the most recent news in the bulleted list below with commentary and long-form in the paid section. And there’ll be more next week as usual so stay tuned! See you around!

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Blockchain Bulletin

• Celsius Mining announces $1.3M sale of mining equipment. The mining arm of crypto lender Celsius Network announced that it will sell $1.3 million worth of mining rigs as part of its bankruptcy, reported CoinTelegraph.

• Unstoppable Domains partners with Ready Player Me to link up identities in the metaverse. Users of Ready Player Me avatars can now hook them up with their Web3 identities through a partnership with Unstoppable Domains and transfer them to even more metaverse apps and dapps, reported CoinDesk.

Blockchain Behind the Scenes

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