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The SEC Sues Gemini and Genesis
The suit adds to what’s become a horrendous 2023 for Gemini.
CoinSnacks
January 23, 2023 • Estimated Reading Time: 3 minutes
2023 had so far been free from SEC stories, but no longer.
Last week, the SEC emerged once again, this time with a lawsuit alleging that Genesis and Gemini sold unregistered securities.
The Allegations
The SEC’s allegations center on Gemini’s Earn program, which allowed users to generate yield on their crypto.
In the program, users would deposit crypto into Gemini, Gemini would deposit that crypto in Genesis, and Genesis would loan it out for a yield that would be passed back to Gemini.
What seemed like risk-free money though has now created a debacle in which hundreds of thousands of investors are stuck in following Genesis’s post-FTX issues.
Now, the SEC is going one step further in alleging that Gemini Earn was an unregistered security.
Gemini co-founder Tyler Winklevoss is predictably unhappy about the allegations. As he notes in a Twitter thread, Gemini has been in discussions with the SEC about the Earn program for over a year, and they never raised the potential of a lawsuit.
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)
11:10 PM • Jan 12, 2023
Sounds a lot like the SEC to us.
Now What?
The suit adds to what’s become a horrendous 2023 for Gemini.
The situation with Genesis and DCG has become a crisis, with Gemini openly calling DCG and its CEO Barry Silbert fraudsters. And now they have to defend themselves against the SEC.
For the SEC, this is par for the course, and actually a calculated play. They want to rack up wins against major crypto players, and Gemini and Genesis are both major players and weakened from the events of recent months.
You might remember that Coinbase attempted to productively engage with the SEC around a lending product similar to Gemini’s Earn. In response, the SEC issued a Wells notice (an official way to tell a company that the SEC is going to sue them).
If that case is any indication, then Gemini has been dealt a losing hand, despite Winklevoss’s claim that the suit is a “manufactured parking ticket”.
4/ We look forward to defending ourselves against this manufactured parking ticket. And we will make sure this doesn’t distract us from the important recovery work we are doing.
— Tyler Winklevoss (@tyler)
11:10 PM • Jan 12, 2023
The likely outcome is a settlement so Gemini can turn its attention back to the bigger fish of Genesis and DCG.