The crypto business run by the Winklevoss twins is accused of selling unregistered securities. The SEC has said that Genesis and Gemini used illegal lending schemes to make billions of dollars.
On Thursday, the US securities regulator charged Genesis Global Capital and the cryptocurrency exchange Gemini with offering and selling unregistered securities to retail investors through a programme that promised high interest rates on deposits.
The Securities and Exchange Commission said that Genesis, a subsidiary of Digital Currency Group, and Gemini, which is run by Tyler and Cameron Winklevoss, raised billions of dollars in crypto assets from hundreds of thousands of investors through unregistered offers, using Gemini’s Earn crypto asset-lending program, and “avoiding disclosure requirements meant to protect investors.”
“Today’s charges add to what has already been done to show the market and investors that crypto lending platforms and other middlemen need to follow our time-tested securities laws. This is the best way to protect investors. It helps people believe in markets. It can’t be skipped. In a statement, SEC Chair Gary Gensler said, “It’s the law.”
The complaint says that Genesis worked with Gemini on a programme that let customers loan their crypto assets to Genesis in exchange for high interest payments. The SEC says that Gemini handled the transactions and took an agent fee, which could be as high as 4.29 percent, from the returns it got from Genesis.
In November, Genesis froze withdrawals because of a lack of liquidity caused by the collapse of a major crypto exchange, FTX. This stopped about 340,000 Earn customers from taking out about $900 million in crypto assets.
Gurbir S. Grewal, who is in charge of the SEC’s Division of Enforcement, said, “The recent collapse of crypto asset lending programmes and the suspension of Genesis’ programme show how important it is for platforms that sell securities to small investors to follow federal securities laws.”
In its complaint, the government agency wants to get back any “ill-gotten gains,” plus interest and any civil penalties.