As tensions mount between Gemini and Genesis over their litigation, the Securities and Exchange Commission (SEC) has filed a complaint against the two actors for non-compliance with federal securities laws.
The SEC attacks Gemini and Genesis
As the Securities and Exchange Commission (SEC) began investigating Digitial Currency Group (DCG) last week, it is now interested in its subsidiary Genesis as well as the Gemini exchange Winklevoss twins. Indeed, the SEC accuses the two entities of having proceeded to “the unregistered offer and sale of securities to retail investorsas part of the Gemini Earn product.
According to the complaint filed by the American financial policeman, the two actors are accused of having offered Gemini Earn to investors based in the United States during the period extending from February 2021 to November 2022, in fact violating federal securities laws.
As the SEC reminds us, this product was born of an agreement concluded between Genesis and Gemini in December 2020. In addition, the complaint points to a lack of transparency on the part of the two protagonists. Indeed, Gemini would have taken up to 4.29% management fees on the returns paid by Genesis, before distributing them to its clients. On the other hand, the contract between the two companies seemed to lack safeguards:
“Genesis exercised its discretion over how to use investors’ crypto-assets, to generate revenue for its business and pay the interest rates it promised. [aux investisseurs de] Gemini Earn. The Gemini Earn Agreement did not contain any explicit terms to restrict how investors’ crypto-assets would be used by Genesis. »
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Gary Gensler speaks out on regulation
Following the case, Gary Gensler, the chairman of the SEC, took the opportunity to remind you of the regulatory needs of the industry :
We @SECGov charged Genesis & Gemini for the unregistered offer & sale of crypto asset securities through Gemini Earn.
Crypto intermediaries need to comply with our securities laws. This protects investors. It promotes trust in markets. It’s not optional. It’s the law.
— Gary Gensler (@GaryGensler) January 12, 2023
To introduce his message, he used an explicit analogy about safety in cars. This comparison allows him to argue that the cryptocurrency industry must be regulated in the same way as the entire financial sectordespite technological differences:
“Seat belts are a standard in every car. This is true despite many innovations in automotive technology. Whether the car is four-wheel drive, two-wheel drive, gasoline or electric, drivers and passengers deserve to be protected. Likewise, our federal security laws protect investors. »
If regulation must indeed be there to protect investors from fraudulent actions such as those operated by FTX, or from the lack of transparency that Gemini and Genesis seem to have shown, it is still necessary that this regulation be fair, appropriate and applicable.
Indeed, if abuses are a reality and they must be punished, the whole issue will be not to use them as a pretext to blame an entire industry.
👉 Also in the news – Search of Nexo in Bulgaria: 300 people deployed during the operation
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Source: Securities and Exchange Commission
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I timidly discovered the world of blockchain at the end of 2018 during my quest for financial freedom. Initially invested moderately, it was only two years later that I took the gamble of betting everything on the movement that was taking shape then. I then dedicate 2021 to training myself better to acquire more knowledge and seriousness. As I often like to say: I still have a billion things to learn. And what I do know, I want to share with you.
Vincent Mayor
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