2 - 3 minute read
On Thursday, January 12th, the U.S. Securities and Exchange Commission (SEC) filed charges against Genesis Global Capital LLC and Gemini Trust Company LLC for the illegal sale of unregistered securities to numerous investors through a crypto lending program. Tyler Winklevoss, a co-founder of Gemini, has spoken out against the charges, stating that the lawsuit is “rather disappointing” and that it will reduce the chances of users receiving their funds.
The Earn program, which was a partnership between Gemini and Genesis, promised returns of around 8% on customer deposits. Gemini loaned customers’ deposits to Genesis for trading and lending activities, sending over $900 million worth of crypto to the company for these transactions. The program was successful during the crypto boom of 2020 and 2021, but when the crypto winter hit and borrowers failed to repay their loans, the program collapsed.
The Winklevoss brothers, Tyler and Cameron, have been engaged in a public blame game with Barry Silbert, the founder of Digital Currency Group (DCG) and Genesis. Cameron Winklevoss has publicly called for Silbert’s resignation and blamed him for the collapse of the Earn program. Silbert and DCG have denied these accusations and have stated that they are a publicity stunt.
The SEC’s lawsuit against Gemini and Genesis seeks injunctive relief and other civil penalties against the firms. The SEC has classified the Earn program as a security, stating that it includes an investment contract and a note in the document. This classification puts the program under the jurisdiction of securities laws, which the SEC intends to enforce.
Tyler Winklevoss has also spoken out against the SEC’s lawsuit, stating that it is a political move. He alleges that the SEC is using the lawsuit as a way to assert its authority over the crypto market and that it is not in the best interest of investors.
The collapse of the Earn program has left over 340,000 participants without access to their funds, leading some to file class action lawsuits. The SEC’s lawsuit against Gemini and Genesis adds another layer of complexity to the already complicated situation and it remains to be seen how it will play out in the court of law.