Genesis and Gemini prosecuted for breach of stock market laws

The US Securities and Exchange Commission accuses them of offering cryptocurrency loans, which allowed them to raise billions without registering with the competent authorities.

The US Securities and Exchange Commission, SEC, on Thursday (January 12th) filed lawsuits against cryptocurrency companies Genesis and Gemini for offering to provide cryptocurrency loans without registering with the competent authorities. However, through this offer, the two companies have, among other things, “raised billions of dollars in cryptocurrency assets from hundreds of thousands of investors”the SEC said in a statement.

Other charges related to this affair could be announced later, specifies the agency, which is currently seeking to demonstrate that it regulates the sector well after the uproar caused by the bankruptcy of FTX and Alameda Research. Their founder, Sam Bankman-Fried, is accused of misappropriating funds deposited by customers on the FTX platform to use them, without their permission, in risky financial transactions via Alameda.

Genesis, a subsidiary of Digital Currency Group, presents itself as a cryptocurrency brokerage platform for professional investors. Founded by the Winklevoss brothers, popularized by the movie “The Social Network” on the creation of Facebook, Gemini offers several financial products related to cryptocurrencies to the public.

According to the SEC complaint, the two companies entered into an agreement in late 2020 whereby Genesis would offer Gemini customers the ability to lend their cryptocurrencies in exchange for interest, in a program called Gemini Earn. Gemini took commissions along the way, while Genesis used the cryptocurrencies at its discretion. But Genesis, hit by the bankruptcy of FTX and Alameda, in November suspended the ability for lenders to withdraw their cryptocurrencies. The SEC says Genesis then had about $900 million in borrowed cryptocurrency from about 340,000 customers.

The agency believes that Gemini Earn is actually related to fundraising in the markets and as such should have been registered with its services. Such a process should protect investors by publishing a lot of information. With these new charges, the SEC wants “Make it clear to the market and investors that cryptocurrency lending platforms and other intermediaries must comply with our time-tested securities laws”, its president Gary Gensler commented in the press release. The two companies did not immediately respond to inquiries from AFP.

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