The American stock market authority accuses them of having offered cryptocurrency loans which allowed them to raise billions, without registering with the competent authorities.
The US stock market authority, the SEC, on Thursday (January 12th) filed lawsuits against cryptocurrency companies Genesis and Gemini for offering to make cryptocurrency loans without registering with the competent authorities. However, the two companies have, through this offer, “raised billions of dollars in cryptocurrency assets from hundreds of thousands of investors”the SEC said in a statement.
Other charges related to this affair could be announced later, specifies the agency, which is currently seeking to demonstrate that it regulates the sector well after the tumult caused by the bankruptcy of FTX and Alameda Research. Their founder, Sam Bankman-Fried, is accused of having misappropriated funds deposited by clients on the FTX platform, to use them, without their authorization, in risky financial transactions via Alameda.
Genesis, a subsidiary of Digital Currency Group, presents itself as a cryptocurrency brokerage platform for professional investors. Founded by the Winklevoss brothers, popularized by the film “The Social Network” on the genesis of Facebook, Gemini offers several financial products related to cryptocurrencies to the general public.
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According to the SEC complaint, the two companies entered into an agreement at the end of 2020 whereby Genesis would offer Gemini customers the possibility of lending their cryptocurrencies in exchange for interest, in a program called Gemini Earn. Gemini took commissions on the way, while Genesis used the cryptocurrencies at its discretion. But Genesis, affected by the bankruptcy of FTX and Alameda, suspended in November the possibility for lenders to withdraw their cryptocurrencies. The SEC says Genesis then held about $900 million in borrowed cryptocurrencies from about 340,000 customers.
The agency believes that Gemini Earn is in fact akin to fundraising on the markets and should therefore have been registered with its services. Such a process is supposed to protect investors by making a lot of information public. With these new charges, the SEC wants “Make it clear to the market and to investors that cryptocurrency lending platforms and other intermediaries must comply with our well-tested securities laws”, commented its president Gary Gensler, in the press release. The two companies did not immediately respond to requests from AFP.