SEC Charges Crypto Firms Genesis and Gemini With Selling Unregistered Securities

The SEC alleges they raised billions of dollars in assets from hundreds of thousands of investors without registering the lending program.

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Tyler (L) and Cameron (R) Winklevoss are the co-founders of cryptocurrency exchange Gemini
Image: Joe Raedle (Getty Images)

The U.S. Securities and Exchange Commission charged Genesis Global Capital LLC and Gemini Trust Company LLC on Thursday for allegedly providing unregistered securities to investors through a program that touted a high interest on deposits.

Gemini is a crypto exchange founded by twins Tyler and Cameron Winklevoss and Genesis is a crypto lender. The pair partnered on a venture called Gemini Earn.

The SEC claims Genesis raised billions of dollars from hundreds of thousands of investors without complying with SEC regulations to register its Gemini Earn Lending program. Through not registering its subsidiary, Genesis and Gemini allegedly bypassed all “disclosure requirements designed to protect investors,” SEC Chair Gary Gensler said in a statement to The New York Times.

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Gensler added the charges should “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 Winklevoss brothers have called the allegations “disappointing” and told BBC they look forward to defending themselves and the company.

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Gensler said in a separate statement to the outlet, “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. Doing so best protects investors. It promotes trust in markets. It’s not optional. It’s the law.”

Tyler Winklevoss responded in a tweet yesterday, calling it “super lame” that the SEC notified the press about the lawsuit, allegedly before notifying Genesis and Gemini.

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“We look forward to defending ourselves against this manufactured parking ticket. And we will make sure this doesn’t distract us from the important recovery work we are doing,” Winklevoss wrote.

He added, “For the avoidance of doubt, Gemini has always worked hard to comply with all relevant laws and regulations. Any suggestion to the contrary is unsupported by the facts.”

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However, a Digital Currency Group spokesperson negated the accusations in a statement to BBC, calling them “malicious, false, and defamatory attacks,” adding Winklevoss’ claims are a “desperate and unconstructive publicity stunt.”

These allegations come as the crypto industry has been decimated followingthe implosion of FTX in November, prompting accusations of fraud against its founder Sam Bankman-Fried.