The Securities and Exchange Commission (SEC) sued cryptocurrency investment firm Genesis and cryptocurrency exchange Gemini, claiming that they illegally offered securities to investors via their joint Gemini Earn crypto loan scheme.

Genesis and Gemini launched the Gemini Earn program in February 2021, allowing Gemini clients to lend their crypto assets to Genesis in exchange for income. The businesses' arrangement allowed Gemini Earn investors to offer their crypto assets to Genesis.

According to the SEC complaint, Gemini took an agent fee from the profits Genesis gave Gemini Earn investors, which at times was as high as 4.29%. When the program debuted, the cryptocurrency market was seeing rapid expansion. In February 2021, Bitcoin was valued around 47,000 USD. It reached its all-time high of more over 67,000 USD nine months later.

However, the market entered a dip in March of last year and got more volatile following the November collapse of crypto exchange FTX. Bitcoin is now trading at around 20,850 USD. Genesis stopped withdrawals for Gemini Earn investors in November due to a shortage of available assets during market volatility.

The Gemini Earn program was discontinued on the 8th of January. Genesis owned roughly 900 million USD in funds from 340,000 Gemini Earn investors when withdrawals were halted, and those investors were unable to withdraw their funds.

Sources:

https://www.investing.com/news/cryptocurrency-news/us-sec-charges-gemini-genesis-for-selling-unregistered-securities-2980111

https://coinedition.com/us-sec-charges-gemini-genesis-for-selling-unregistered-securities/

https://www.bankingdive.com/news/sec-charges-gemini-genesis-with-selling-unregulated-securities/640404/

https://www.sec.gov/news/press-release/2023-7