The U.S. Securities and Exchange Commission has filed charges against crypto lender Gemini and Genesis for selling unregistered securities through Gemini’s “Earn” scheme.

The SEC claims that Earn enabled Genesis and Gemini to acquire billions of dollars from a whole lot of 1000’s of investors through these unregistered offers.

Genesis And Gemini Partnership

Earn was introduced by Gemini in February 2021 and remained in operation until January 8 of the next yr.

Because of this of a partnership with the cryptocurrency lender and subsidiary of Digital Currency Group (DCG), Genesis, customers of Gemini got the chance to earn yield by lending their cryptocurrency to the market-making firm.

The SEC said the firms misrepresented their business model by promoting returns of as much as 8% to its clientele without registering as a lending partnership with the suitable authorities.

In response to open letters written by the co-founder of Gemini Earn, Cameron Winklevoss, Genesis owes $900 million to 340,000 Gemini Earn users.

Genesis Withdrawals And SEC Crackdown

Because the FTX turmoil sent shockwaves to the crypto market last yr, Genesis paused the withdrawals on the platform attributable to insufficient liquidity.

“The U.S. retail investors who participated within the Gemini Earn program have suffered significant harm,” claims SEC. Roughly 340,000 investors lost funds attributable to the freeze in withdrawals.

“Today’s charges construct on previous actions to clarify to the marketplace and the investing public that crypto lending platforms and other intermediaries must comply with our time-tested securities laws,” says SEC chair Gary Gensler.

Gemini Co-founder Marks SEC Actions As ‘Counterproductive’

In response to the SEC charges against the crypto exchange, Cameron Winklevoss defended the firm by claiming that the exchange is working hard to get better investor’s funds and called the SEC’s actions as “super lame” and “counterproductive.”

“As a matter of background, the Earn program was regulated by the @NYDFS and we’ve been in discussions with the SEC concerning the Earn program for greater than 17 months. They never raised the prospect of any enforcement motion until AFTER Genesis paused withdrawals on November sixteenth” said Tyler Winklevoss.

In response to the co-founder, Gemini will defend itself against the SEC claims he described as “parking ticket.” And to wrap up his defense, Tyler hailed Bitcoin and wrote this:

7/ Oh, and on a more positive note, bitcoin hit 19k today! Onward!

— Tyler Winklevoss (@tyler) January 12, 2023

The crackdown on Gemini and Genesis implies that the SEC is taking precautionary measures to stop frauds like FTX from happening again.

Meanwhile, the SEC can also be looking into whether or not other firms or individuals are connected to the alleged misbehavior, in addition to whether or not some other securities-law breaches were committed.

-Cover image from Pixabay and Bitcoin chart from Tradingview.com.