Genesis Settles SEC Case for $21M

Genesis Global Capital LLC has agreed to pay a $21 million civil penalty as part of a court settlement regarding its Gemini Earn lending program. The Securities and Exchange Commission (SEC) charged Genesis and Gemini with conducting an unregistered securities offering when they launched the Gemini Earn crypto lending program for retail investors. SEC Chair Gary Gensler emphasized the importance of crypto lending platforms and intermediaries complying with securities laws to protect investors and promote trust in the markets.

As per the settlement, the SEC will receive a portion of the penalty after other bankruptcy payments have been made, including claims by retail investors who participated in the Gemini Earn program. The $21 million fine brings an end to the SEC’s lawsuit against Gemini and Genesis, which began in January 2023 because of the sale of unregistered securities through Gemini Earn. Genesis suspended user withdrawals in November 2022 when the program had approximately 340,000 customers and $900 million in assets under management.

The $21 million penalty follows Gemini’s agreement, three weeks prior, to pay a $37 million fine for multiple compliance failures. Superintendent Adrienne A. Harris of the New York State Department of Financial Services (NYDFS) explained that these failures threatened the company’s safety and soundness. As part of the settlement with NYDFS, Gemini will return at least $1.1 billion to customers of the Gemini Earn Program through the Genesis bankruptcy proceeding. Pending approval from the bankruptcy court, Gemini expects Earn users to receive 100% of their cryptocurrency assets back plus appreciation.

Gemini stated that if approved, the settlement will result in the return of over $1.8 billion in value to users, $700 million more than when Genesis suspended withdrawals in November 2022. These settlements and penalties reflect regulatory crackdowns on the crypto industry, highlighting the increasing scrutiny faced by platforms and intermediaries in the sector. Compliance with securities laws and regulations is essential to ensure investor protection and foster trust in the market.

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