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Genesis has reached a settlement with the Securities and Exchange Commission (SEC), agreeing to pay a civil penalty of $21 million for the unregistered offer and sale of securities.
The SEC’s charges were related to Gemini and Genesis’ crypto asset lending program, Gemini Earn, which came under scrutiny in January 2023.
According to the SEC’s filing, Genesis faced challenges in November 2022 when it announced its inability to allow Gemini Earn investors to withdraw their crypto assets due to insufficient liquid assets, stemming from volatility in the crypto asset market.
At the time, Genesis held approximately $900 million in crypto assets from 340,000 Gemini Earn investors.
Following the charges, Genesis filed for bankruptcy, signaling the severity of the situation.
In a separate agreement, Gemini has committed to paying $1.1 billion to Gemini Earn customers as part of their involvement in the partnership.
SEC Chair Gary Gensler emphasized the importance of compliance with securities laws, stating, “We charged Genesis with failing to register its retail crypto lending product before offering it to the public, bypassing essential disclosure requirements designed to protect investors.” He added that such settlements reinforce the necessity for crypto lending platforms and intermediaries to adhere to securities laws for investor protection and market trust.
Gurbir S. Grewal, Director of the SEC’s Division of Enforcement, underscored the risks investors face when market participants disregard federal securities laws. He highlighted the significance of investor protection disclosures mandated by these laws, stating that no amount of advertising or hype can substitute for such disclosures.
The settlement with Genesis serves as a reminder of the importance of regulatory compliance in the rapidly evolving crypto landscape, aiming to safeguard investor interests and promote market integrity.
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