TL;DR
- Genesis Global Capital LLC has agreed to a $21 million settlement with the SEC over charges related to its involvement in the Gemini Earn crypto asset lending program, which was deemed an unregistered securities offering.
- The settlement includes a permanent injunction against future violations and concludes a legal battle that began in January 2023, highlighting the importance of adhering to securities laws in the crypto industry.
- This follows a separate $37 million settlement by Gemini with the NYDFS in February 2024, with an additional requirement for Gemini to return at least $1.1 billion to customers through the Genesis bankruptcy proceeding.
In a landmark settlement, Genesis Global Capital LLC has agreed to pay a $21 million civil penalty to resolve charges brought by the U.S. Securities and Exchange Commission. The charges stem from the company’s involvement with the Gemini Earn cryptocurrency lending program, which the SEC deemed an unregistered securities offering.
The settlement, announced on March 19, 2024, concludes a legal battle that began in January 2023 when the SEC initiated a lawsuit against Genesis and Gemini for their Gemini Earn program. The program, which was marketed to retail investors, allowed customers to earn interest on their cryptocurrency holdings.
However, the SEC argued that the program constituted an unregistered securities offering, a violation of federal securities laws. Genesis’s agreement to pay the fine is part of a final court judgment, which also includes a permanent injunction against future violations.
The Cost of Crypto Innovation: Genesis Global’s Legal Journey
The SEC has emphasized that this settlement underscores the importance of crypto lending platforms and other intermediaries adhering to established securities laws to protect investors and maintain trust in the markets.
The $21 million penalty is a significant sum, reflecting the gravity of the charges and the SEC’s commitment to enforcing compliance. However, the SEC will only receive a portion of the penalty after other bankruptcy payments have been made, including claims by retail investors for Gemini Earn.
This settlement comes on the heels of a separate agreement in February 2024, where Gemini consented to pay a $37 million penalty for multiple compliance failures as determined by the New York State Department of Financial Services (NYDFS). The NYDFS settlement also stipulates that Gemini must return at least $1.1 billion to customers of the Gemini Earn Program through the Genesis bankruptcy proceeding.
The resolution of this case marks a pivotal moment for the cryptocurrency industry, as it navigates the complexities of regulatory compliance. It serves as a cautionary tale for other firms operating in the space, highlighting the need for rigorous adherence to securities laws to avoid similar punitive measures.
