Agreements and sanctions: Genesis Global Capital and the SEC

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Genesis Global Capital agrees to pay a fine of 21 million dollars, which represents the settlement reached with the SEC regarding the charges filed. 

The refund to the SEC will only occur after the complete satisfaction of the creditors authorized by the bankruptcy court. Let’s see all the details below. 

Priority to SEC and bankruptcy credits: sanctions for Genesis

As anticipated, Genesis has agreed to pay a civil penalty of $21 million as part of a settlement for charges related to participating in an unregistered offering and sale of securities through Gemini Earn.

An injunction has been imposed permanently, as announced by the United States Securities and Exchange Commission.

Payment to the SEC will only be made after the satisfaction of all claims allowed by the bankruptcy court, including retail investors in Gemini Earn.

Gary Gensler, SEC chairman, stated the following:

We have accused Genesis of not registering its retail crypto lending product before offering it to the public, bypassing essential disclosure requirements designed to protect investors. Today’s agreement strengthens previous actions to clarify to the market and the investing public that cryptocurrency lending platforms and other intermediaries must comply with our time-tested securities laws. This is the best protection for investors and promotes confidence in the markets. It is not optional. It is the law.”

Gurbir S. Grewal, Director of the SEC Division of Enforcement, commented:

“The failure of the Gemini Earn program highlights the risks that investors are exposed to when market participants do not comply with federal securities laws. This enforcement action clarifies that no amount of advertising can replace the information required by federal securities laws for investor protection.”

The previous SEC accusations and the failure of Genesis

We remind you that the SEC filed charges against Genesis and Gemini Trust Company on January 12, 2023, focusing on the Gemini Earn program. 

This allowed retail investors to lend cryptographic assets to Genesis in exchange for the interest earned on the assets lent.

In November 2022, Gemini Earn investors were unable to withdraw their cryptocurrencies due to a lack of liquidity from Genesis.

We also remind you that the company filed a voluntary bankruptcy petition on January 19, 2023, at the bankruptcy court of the United States for the Southern District of New York.

US Court finds plausible cause against Gemini and Genesis

Recently, a case regarding the alleged securities violation by the cryptocurrency companies Gemini and Genesis was deemed plausible by a US judge.

The district judge Edgardo Ramos rejected the dismissal requests filed by the cryptocurrency exchange Gemini and the cryptocurrency lender Genesis in a complaint filed by the US SEC. 

The complaint concerns an Earn program hosted by both companies until the end of 2022. 

In a court order dated March 13, Judge Ramos ruled that the SEC has provided sufficient grounds to support that Gemini and Genesis have violated U.S. securities laws.

The ruling, issued in a court in the Southern District of New York, cited the Howey Test and the Reves Test. The commission found sufficient justification to classify the Earn program according to existing securities laws.

The judge has concluded that the complaint plausibly alleges that the defendants offered and sold unregistered securities through the Gemini Earn program. Rejecting the defendants’ dismissal requests.

In the January 2023 case, SEC litigants claimed that cryptocurrency companies marketed the Earn program as an investment opportunity, thus meeting the agency’s securities requirements.

Both companies have been subjected to multiple coercive actions initiated by American regulatory authorities, including the office of the Attorney General of New York (NYAG).

The Attorney General Letitia James has sued the three companies, Gemini, Genesis and DCG, for 1 billion dollars in an alleged cryptocurrency fraud scheme.