The U.S. Securities and Exchange Commission (SEC) charged crypto companies Genesis Global Capital and Gemini Trust for allegedly offering unregistered securities to investors through a lending program.
In Feb. 2021, crypto exchange Gemini, co-founded by twins Cameron and Tyler Winklevoss, offered its customers the opportunity to loan assets to crypto lender Genesis in a program that promised high interest rates, according to a press release from the SEC. Called the Gemini Earn program, Gemini facilitated the transactions and allegedly earned fees as high as 4.3 percent.
However, the SEC’s complaint, filed Jan. 12 in New York federal court, says investor withdrawals were paused in November, after Genesis announced it lacked sufficient funds following the collapse of crypto exchange FTX and subsequent instability in the crypto market.
Gemini Earn, which was terminated earlier this month, allegedly holds approximately $900 million of assets from 340,000 investors.
“The recent collapse of crypto asset lending programs and the suspension of Genesis’ program underscore the critical need for platforms offering securities to retail investors to comply with federal securities law,” said Gurbir Grewal, director of the SEC’s enforcement division, in a statement.
Tyler Winklevoss tweeted that Gemini is “working hard to recover funds” and was disappointed that the SEC announced its charges before notifying the company.
Genesis and Gemini did not respond to requests for comment.