Cryptocurrency

Winklevoss twins, Genesis target of SEC crypto crackdown

NEW YORK (AP) — The Securities and Exchange Commission went after two prominent companies in the crypto community, alleging that Genesis Global Capital and the crypto exchange Gemini were selling unregistered securities through a popular program that was supposed to give high interest payments on crypto deposits.

The SEC’s lawsuit on Thursday against Gemini, which is run by Tyler and Cameron Winklevoss who are sometimes better known for being the disputed creators of Facebook, and Genesis is part of a broader cryptocurrency crackdown by multiple U.S. government agencies after crypto prices fell sharply last year, exposing mostly retail investors to billions of dollars in losses.

Tyler Winklevoss called the suit a “parking ticket” and vowed to defend the company.

The lawsuit involves a program known as Gemini Earn, which allowed individuals to deposit their cryptocurrencies in turn for a high interest rate, as much as 4.29%. Gemini and Genesis would then lend out those cryptocurrencies to other investors.

But the collapse of crypto prices last year has put many of the crypto lenders out of business, into bankruptcy, or caused them to dramatically pull back on their business. Voyager Digital, Celsius and FTX — whose founder was criminally charged last month — were all platforms that did various forms of deposit-and-lending operations.

The SEC alleges that Gemini Earn was effectively an offer and sale of securities and the program should have been registered with U.S. authorities. Further, as crypto prices collapsed, Genesis had to freeze withdrawals from its Gemini Earn program and customers are now out around $900 million, according to the SEC.

The SEC under Chairman Gary Gensler has argued for some time that they have the legal authority to regulate crypto, and they have largely used their lawsuit and enforcement powers to do so.

“Today’s charges build on previous actions to make clear to the marketplace and the investing public that crypto lending platforms and other intermediaries need to comply with our time-tested securities laws,” Gensler said in a statement.

The cryptocurrency industry, its lobbyists and friends in Congress have pushed back hard on the SEC, and have largely been pushing for the smaller Commodity Futures Trading Commission to oversee crypto.

Tyler Winklevoss said on Twitter that the Gemini Earn program was regulated by the New York Department of Financial Services and they had been in conversations with the SEC about Earn for more than a year-and-a-half. He said the SEC did not have issues with the Earn program until withdrawals were paused in November during the aftermath of the FTX bankruptcy.

“We look forward to defending ourselves against this manufactured parking ticket,” Winklevoss said. “And we will make sure this doesn’t distract us from the important recovery work we are doing.”

Source: https://apnews.com/article/cryptocurrency-southeastern-conference-united-states-government-business-lawsuits-55f5beeff6a66a7301ab4d02f66cd6ae

Donovan Larsen

Donovan is a columnist and associate editor at the Dark News. He has written on everything from the politics to diversity issues in the workplace.

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