Now the Securities and Exchange Commission is trying to do something about it. On Thursday, the regulator accused Gemini and another company with which it does business, Genesis, for failing to record their program. as and security. This is an attempt to hold companies accountable and can hurt investors to pay back.
The SEC is targeting Gemini Earn, a program that promises high-interest returns to consumers as they park their money in these crypto accounts. He brought the same charge against Genesis.
“We argue that Genesis and Gemini are offering unregistered securities to the public, bypassing disclosure requirements designed to protect investors,” SEC chairman Gary Gensler said in a statement announcing the charges. Said. The recording, he said, “is not optional. It’s the law.” The agency did not specify the amount of compensation it sought.
The SEC’s move is part of a government effort to hold crypto companies accountable for massive customer losses, which have mushroomed and sparked industry volatility since cryptocurrency exchange FTX exploded in November. The SEC and the Commodity Futures Trading Commission each recently complaints Considering the same goal against Sam Bankman-Fried, co-founder of FTX.
As part of the win, Gemini gives customers high rates for borrowing their money. They did this in partnership with Genesis, which borrowed heavily from Gemini. In recent weeks, Gemini and Genesis executives have been at odds over who isn’t fulfilling their responsibility to return the money to consumers.
As a result, nearly $900 million has been frozen in Gemini Earn, with no indication of when customers will have access to it.
Not every expert is convinced the SEC has a strong claim.
Carol Goforth, a professor at the University of Arkansas School of Law and a securities regulation expert, said it’s not clear whether the Gemini example could pass one of the various regulatory tests the government uses for securities.
“Just to say that every crypto is a security is deeply offensive,” he said. “Whether it’s Gemini Earn or something else, it depends on how the product is marketed. They’re not all the same.”
Winklevosses, the co-founders of Gemini, is known as a provocateur in Silicon Valley. The twin brothers were Harvard Olympic rowers who sued Mark Zuckerberg for allegedly stealing his and his partners’ idea for Facebook from a company they founded. As Gemini became one of the more popular crypto lending platforms, they have established themselves as crypto early adopters, making themselves some of the most successful entrepreneurs in the industry.
A big reason for this popularity was Earning, which has promised returns of up to 8 percent since its launch nearly two years ago.
Genesis is part of the Digital Currency Group, or DCG, led by financial tycoon Barry Silbert and owned by asset manager Grayscale Investments and news platform CoinDesk.
Neither Cameron Winklevoss of Gemini nor a representative of Genesis responded to a request for comment.
The SEC has tried to use this authority before. For example, by early 2022, agency and government securities institutions charged and reached a $100 million settlement with crypto lender BlockFi.
SEC officials told reporters on Thursday that the move to Gemini and Genesis is part of a larger plan to pursue crypto companies that are not registered as securities. They said they made no distinction between Gemini and Creation while continuing the action.
