- The SEC has filed charges against Genesis and Gemini.
- The two firms allegedly sold unregistered securities in a high-yield product.
- The firms have been locked in a high-profile struggle for over $900 million in client assets.
On Thursday, the Securities and Exchange Commission (SEC) filed charges against cryptocurrency companies Genesis and Gemini, alleging that the companies sold unregistered securities in conjunction with a high-yield product that was offered to depositors.
In February 2021, the cryptocurrency exchange Gemini and the cryptocurrency lender Genesis collaborated on a product for Gemini called Earn, which promised clients returns of up to 8% on their investments.
According to the SEC, Genesis lent cryptocurrency belonging to Gemini customers and paid a percentage of the gains back to Gemini. Gemini then deducted an agent charge, which was often more than 4%, and distributed the remaining profit to its users.
However, officials from the SEC said in a complaint that was submitted to the federal court in Manhattan that Genesis should have registered the product as a securities offering.
For instance, SEC chair Gary Gensler said in a statement;
</blockquote>“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,”
The two companies have been locked in a high-profile struggle over $900 million in client assets that Gemini transferred to Genesis as part of the Earn program, which was terminated last week.
Gemini handed the assets to Genesis after the Earn program was discontinued. After the collapse of FTX in November, which sparked a stampede for the exits throughout the crypto world, Genesis temporarily halted withdrawals, and the company has not yet let Earn users withdraw their earnings.
