WASHINGTON D.C. - Genesis Global Capital, LLC has agreed to pay a $21 million penalty and accept a permanent injunction to resolve allegations by the Securities and Exchange Commission (SEC) that it offered and sold securities without proper registration. The settlement, announced today, pertains to the company's involvement with the Gemini Earn program, a crypto asset lending initiative.
The SEC had previously charged Genesis and Gemini Trust Company, LLC on January 12, 2023, for their roles in the Gemini Earn program. The program allowed customers to loan their cryptocurrency assets to Genesis in return for interest payments. However, in November 2022, Genesis was unable to fulfill withdrawal requests due to insufficient liquidity amid market volatility, leaving around 340,000 investors without access to approximately $900 million in crypto assets.
As part of the settlement, Genesis has not admitted or denied the SEC's allegations but has consented to the final judgment that enjoins the firm from future violations of Section 5 of the Securities Act of 1933. The SEC emphasized that the collapse of the Gemini Earn program highlighted the risks to investors when market participants circumvent federal securities laws.
SEC Chair Gary Gensler remarked on the importance of compliance with securities laws for crypto lending platforms and other intermediaries, stating it is crucial for investor protection and market trust. Gurbir S. Grewal, Director of the SEC’s Division of Enforcement, added that no amount of promotion can replace the necessary investor-protection disclosures mandated by law.
Genesis, alongside two affiliates, had filed for Chapter 11 bankruptcy on January 19, 2023. The SEC's settlement stipulates that the penalty will be paid after all other allowed claims are settled by the bankruptcy court, including those of retail investors from the Gemini Earn program.
The SEC's investigation and subsequent litigation in bankruptcy court were conducted by a team of officials, and the ongoing district court litigation against Gemini is being led by another team within the SEC. The settlement with Genesis marks a continued effort by the SEC to enforce securities laws within the evolving landscape of cryptocurrency markets, based on a press release statement.
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