The Securities and Exchange Commission (SEC) announced today that Genesis Global Capital, LLC has agreed to a final judgment requiring it to pay a $21 million civil penalty and a permanent injunction to settle charges involved in an unregistered offering and sale of securities through a crypto asset lending program known as the Gemini Earn program.
Under the terms of the settlement, the SEC will not receive any portion of the penalty until after all other claims allowed by the bankruptcy court, including claims from retail investors in the Gemini Earn program, have been paid.
The SEC charged Genesis and Gemini Trust Company, LLC on January 12, 2023. According to the SEC’s complaint, the Gemini Earn program was a purported investment opportunity where Gemini customers, including retail investors in the United States, lent their crypto assets to Genesis in exchange for Genesis’ promise to pay the interest Genesis earns from the use of the borrowed crypto assets.
The complaint alleges that, in November 2022, Genesis announced that it would not allow Gemini Earn investors to withdraw their crypto assets because Genesis did not have sufficient liquid assets to meet withdrawal requests following volatility in the asset market. encryption data. At the time, Genesis held approximately $900 million in crypto assets from 340,000 Gemini Earn investors.
Genesis and two of its subsidiaries filed voluntary Chapter 11 petitions in the US Bankruptcy Court for the Southern District of New York on January 19, 2023. Investors were unable to access or withdraw the crypto assets they invested in Genesis through the Gemini Earn.
The SEC’s complaint, filed in the U.S. District Court for the Southern District of New York, charged Genesis and Gemini with violating Sections 5(a) and 5(c) of the Securities Act of 1933. In addition to the civil penalty stated above, Genesis, without admitting or denying the allegations in the SEC’s complaint, consented to the entry of a final judgment permanently enjoining Genesis from violating Section 5 of the Securities Act.