The Securities Exchange Commission Accused Genesis Gemini Illegally selling securities for hundreds of thousands of investors

The US Securities and Exchange Commission (SEC) has charged Genesis Global Capital LLC Gemini Trust Company LLC of unlawfully trading securities to thousands of investors via its crypto lending program.

Genesis, a member of the Digital Currency Group, agreed to a deal with Gemini in December 2020, whereby Gemini customers had the option to loan out their crypto assets to Genesis in exchange for interest income. According to the SEC, by February 2021, the companies had raised billions from investors in crypto assets.

The SEC said that by selling and buying crypto assets through their websites, Gemini and Genesis are in breach of securities laws. Gemini and Genesis have not yet responded to a request for comment.

In November 2020, Genesis informed investors that they could no longer withdraw their crypto assets due to volatility in crypto markets causing a liquidity crisis. At the time, Genesis had assets of around $900 million from 340,000 investors. The regulator said investors have not been able to withdraw their assets.

The agency said that investigations into other violations related to this matter are ongoing. In February 2021, a subsidiary of BlockFi Inc, a rival crypto firm, agreed to pay $100 million to the SEC in settlement of charges arising from its offer of a similar interest-bearing product.

Creditors of Genesis have been looking for a way to avoid a similar situation to FTX’s swift bankruptcy. A person familiar with the matter said that creditors owe the company more than $3 billion. On Tuesday, Gemini co-founder Cameron Winklevoss publicly called for the resignation of DCG CEO Barry Silbert, accusing him of using “bad faith tactics”. DCG has dismissed all of Winklevoss’s allegations as false and defamatory.