Genesis to Pay $21M Settlement in SEC Case

Genesis has agreed to pay a $21m civil penalty as part of a settlement with the SEC over accusations regarding the Gemini Earn financing scheme.

As part of a final court judgment to settle accusations relating to its Gemini Earn financing scheme, Genesis Global Capital LLC has agreed to pay a civil penalty of $21 million.

This is part of the settlement Genesis and Gemini faced charges for conducting an unregistered securities offering without proper registration following the launch of the Gemini Earn cryptocurrency loan scheme for retail investors.

Chairman of the Securities and Exchange Commission (SEC), Gary Gensler, currently serves in this capacity. In an announcement on March 19, Gensler stated that the settlement terms stipulate that the Securities and Exchange Commission (SEC) will only receive a share of the penalty after completing other bankruptcy payments.

“Today’s settlement builds on previous actions to make clear to the marketplace and the investing public that crypto lending platforms and other intermediaries need to comply with our time-tested securities laws. Doing so best protects investors. It promotes trust in markets. It’s not optional. It’s the law.”

These payments cover claims filed by individual investors for Gemini Earn. The Securities and Exchange Commission (SEC) filed this action against Gemini and Genesis in January 2023 for selling unregistered securities through the Gemini Earn program.

The SEC’s notification states that Genesis halted user withdrawals from its platform in November 2022. At that time, Gemini Earn had around 340,000 consumers and $900 million in funds under control.

Superintendent Adrienne A. Harris of the New York State Department of Financial Services (NYDFS) noted in a statement that was released on February 28 that the fine was imposed three weeks after Gemini agreed to pay a penalty of $37 million for various compliance violations “that threatened the safety and soundness of the company.”

Gemini and the New York Department of Financial Services (NYDFS) have negotiated a settlement that requires Gemini to repay at least $1.1 billion to consumers of the Gemini Earn Program through the Genesis bankruptcy process.

The penalty of $37 million is a component of the settlement. Gemini has stated that it anticipates Earn users will receive a return of 100% of their Bitcoin assets, in addition to appreciation, if the bankruptcy court approves. 

“If approved, we will be returning over $1.8 billion in value (at today’s prices) — $700 million more than when Genesis halted withdrawals on November 16, 2022.”