SEC sues crypto firms Genesis, Gemini for allegedly selling unregistered securities

The U.S. Securities and Exchange Commission on Thursday brought charges against crypto lender Genesis Global Capital and crypto exchange Gemini Trust with selling unregistered securities to retail investors, according to a release . The lawsuit alleged that the unregistered offer and sale of securities took hold through Gemini Earn, a high-yield crypto lending product that both Genesis and Gemini started offering in Feb. 2021. Genesis loaned Gemini users' crypto and directed some of the profits back to Gemini, which acted as an agent to facilitate the transactions and hence deducted an agent fee sometimes as high as 4.29%, the regulator said. The remaining returns were then returned to users. The program was not registered as a securities offering when it clearly should have, as Genesis "exercised its discretion in how to use investors’ crypto assets to generate revenue and pay interest to Gemini Earn investors," it added. “As a result, investors lacked material information about the Gemini Earn program that would have been relevant to their investment decisions.” The complaint seeks permanent permanent injunctive relief, disgorgement and civil penalties. “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," said SEC Chair Gary Gensler. Earlier, The Financial Times reported Genesis owes its creditors over $3B, prompting its owner to explore selling some of the assets in its outsized venture capital portfolio .