Genesis Hit With $21 Million Civil Penalty Over Gemini Earn, Payment To Come After Retail Investors Paid Back
Genesis has agreed to a final judgement with the Securities and Exchange Commission over its Gemini Earn product. The judgement follows charges by the SEC that the company had engaged in the unregistered offer and sale of securities through Gemini Earn, which is a crypto asset lending program.
The settlement amounts to a $21 million civil penalty, along with a permanent injunction.
The good news for investors however, is that the SEC will not receive any funds from the settlement until after all other allowed claims are settled in the bankruptcy court, which includes claims by retail investor claims.
“The collapse of the Gemini Earn program underscores the unknown risks that investors are exposed to when market participants fail to comply with the federal securities laws. As this enforcement action makes clear, no amount of hype and advertising can substitute for the investor-protection disclosures required by the federal securities laws,” commented Gurbir S. Grewal, Director of the Division of Enforcement for the SEC.
READ: SEC Charges Both Gemini And DCG’s Genesis For Unregistered Securities Sale With Earn Program
The settlement follows charges issued back in January 2023 related to Gemini Earn, which Genesis failed to register with the SEC. By the time the charges dropped, Gemini Earn had already indicated that investors in the program would not be able to withdraw funds due to a lack of liquidity for Genesis following the blow up of FTX in November 2022. The program had amassed $900 million in crypto assets from 340,000 users.
One week after the SEC charged Genesis, Genesis and two of its affiliates filed for Chapter 11 bankruptcy in the US Bankruptcy Court for the Southern District of New York.
Genesis today meanwhile announced today that it has asked the Bankruptcy Court to approve the settlement in principal that was floated on February 28, which would see all Earn users receiving 100% of their digital assets back in kind. 97% of the assets are to be returned in near term, with the remainder to be paid as recoveries are obtained from Digital Currency Group.
The funds to be returned also include the appreciation of assets that occurred since the funds were lent to the Earn program.
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As the founder of The Deep Dive, Jay is focused on all aspects of the firm. This includes operations, as well as acting as the primary writer for The Deep Dive’s stock analysis. In addition to The Deep Dive, Jay performs freelance writing for a number of firms and has been published on Stockhouse.com and CannaInvestor Magazine among others.
