Key Case on Profitable Products! SEC Accuses Genesis and Gemini of Selling Unregistered Securities, Triggering Class-Action Lawsuit

On January 13, the U.S. Securities and Exchange Commission (SEC) accused the recently controversial lending institution Genesis and the exchange Gemini of offering unregistered securities and selling securities to retail investors through Gemini Earn. This has also piqued the interest of class-action lawyers, with the main plaintiff Joshua Berdugo investing $13,000 in Gemini Earn and accusing Gemini of deceiving hundreds of thousands of investors by enticing them to purchase unregistered securities unknowingly.

On January 13, the U.S. Securities and Exchange Commission (SEC) accused the lending institution Genesis and the exchange Gemini, which have been making a lot of noise recently, of offering unregistered securities and selling them to retail investors through Gemini Earn. This has also sparked the interest of class-action lawyers, with the main plaintiff Joshua Berdugo investing $13,000 in Gemini Earn and accusing Gemini of deceiving hundreds of thousands of investors by enticing them into purchasing unregistered securities.

The SEC announcement stated, "Gemini Earn investors lend their crypto assets to Genesis, with Gemini acting as an intermediary to facilitate the transactions. Gemini deducts a fee from the returns paid to Gemini Earn investors by Genesis, sometimes as high as 4.29%. As alleged in the complaint, Genesis decides how to use investors' crypto assets to generate income and pays interest to Gemini Earn investors. 'We believe that Gemini and Genesis offered unregistered securities to retail investors.'

Further details: When it rains, it pours - SEC accuses Genesis and Gemini of selling unregistered securities

Gemini founder Tyler Winklevoss expressed his confusion over this. He stated that Gemini Earn is regulated by the New York Department of Financial Services and has been in discussions with the SEC for at least 17 months, so he does not understand the reason for the SEC's actions at this time.

1/ It’s disappointing that the @SECGov chose to file an action today as @Gemini and other creditors are working hard together to recover funds. This action does nothing to further our efforts and help Earn users get their assets back. Their behavior is totally counterproductive.

— Tyler Winklevoss (@tyler) January 12, 2023

This development may add to the headaches of Genesis' parent company DCG founder Barry Silbert and Gemini founders the Winklevoss brothers, as the SEC determined that both companies offered unregistered securities. On the other hand, DCG does not rule out the possibility of restructuring Genesis in bankruptcy, and Gemini, in addition to holding DCG accountable, must also address the predicament of Gemini Earn users being unable to withdraw their funds.

In addition, if the allegations are proven, the revenue products under this model may face securities regulation in the future.

Today we charged Genesis Global Capital, LLC and Gemini Trust Company, LLC for the unregistered offer and sale of securities to retail investors through the Gemini Earn crypto asset lending program.

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— U.S. Securities and Exchange Commission (@SECGov) January 12, 2023