Genesis Global Capital has reached a final court judgment agreeing to pay a $21 million civil penalty to resolve charges linked to the Gemini Earn lending program. This settlement arises from allegations of conducting an unregistered securities offering, which emerged following the launch of the Gemini Earn crypto lending program for retail investors.
Gary Gensler, the chair of the United States Securities and Exchange Commission (SEC), emphasized the significance of this settlement, stating that it underscores the necessity for crypto lending platforms to adhere to securities laws, ensuring investor protection and market trust.
Settlement Terms and Genesis’ Actions
As part of the settlement, the SEC will receive a portion of the penalty after addressing other bankruptcy obligations, including claims by retail investors. This resolution concludes the SEC’s lawsuit against Gemini and Genesis, initiated in January 2023, for selling unregistered securities through the Gemini Earn program.
Genesis ceased user withdrawals on its platform in November 2022, coinciding with around 340,000 customers and $900 million in assets under management within the Gemini Earn program.
Gemini’s Penalties and Customer Restitution
The $21 million fine follows Gemini’s agreement, three weeks prior, to pay a $37 million penalty for various compliance shortcomings. Adrienne Harris, Superintendent of the New York State Department of Financial Services (NYDFS), highlighted these compliance failures, emphasizing their implications for the company’s stability.
The settlement with NYDFS requires Gemini to refund at least $1.1 billion to Gemini Earn program customers through the Genesis bankruptcy proceeding. Gemini anticipates that, if approved by the bankruptcy court, users will recover 100% of their cryptocurrency assets plus any appreciation.
Gemini estimates that, if approved, this process will result in returning over $1.8 billion in value, exceeding the asset value at the time of Genesis’ withdrawal suspension in November 2022 by $700 million.
