Crypto Lender Genesis to Settle US SEC Charges With $21M Fine

The SEC will not receive any part of the civil penalty until all parties, including Gemini Earn investors, receive their bankruptcy claims.

Bankrupt cryptocurrency lender Genesis Global Capital has agreed to pay the United States Securities and Exchange Commission (SEC) a civil penalty of $21 million to settle charges that it offered and sold unregistered securities through the Gemini Earn program.

According to a press release from the SEC, Genesis consented to the entry of a final judgment without admitting or denying the agency’s allegations.

“Today’s settlement builds 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. Doing so best protects investors. It promotes trust in markets. It’s not optional. It’s the law,” SEC chair Gary Gensler stated.

Genesis Agrees to $21M Settlement With SEC

Per the SEC’s complaint filed in the U.S. District Court for the Southern District of New York, Gemini Earn provided an opportunity for customers of the crypto exchange Gemini to loan their assets to Genesis and, in return, receive interest payments from the lender’s use of the tokens.

However, Genesis halted withdrawals for Earn program users in November 2022, citing a lack of sufficient assets to meet withdrawal requests due to the crypto market’s downturn at the time. The SEC said Genesis held roughly $900 million in cryptocurrencies from 340,000 Gemini Earn investors when the platform ceased withdrawals.

About a week before Genesis filed for bankruptcy in January 2023, the SEC sued the firm and Gemini, seeking a permanent injunction to settle the charges. While Genesis navigates its bankruptcy proceedings, Gemini Earn investors have been unable to access or withdraw their assets.

“The collapse of the Gemini Earn program underscores the unknown risks that investors are exposed to when market participants fail to comply with the federal securities laws. As this enforcement action makes clear, no amount of hype and advertising can substitute for the investor-protection disclosures required by the federal securities laws,” commented Gurbir Grewal, Director of the SEC’s Division of Enforcement.

SEC to Receive Payment After Bankruptcy Claims 

Following the agreement between the SEC and Genesis, the agency will not receive any part of the civil penalty until all parties, including Gemini Earn Investors, receive their bankruptcy claims.

Meanwhile, Gemini recently agreed to pay the New York State Department of Financial Services a penalty of $37 million for compliance failures that threatened the company’s safety.