Genesis Global Capital has reached an agreement to pay a $21 million civil penalty as part of a final court judgment to resolve charges related to the Gemini Earn lending program. The charges were brought against Genesis and Gemini for conducting an unregistered securities offering when they launched the Gemini Earn crypto lending program for retail investors.
Gary Gensler, the chair of the United States Securities and Exchange Commission (SEC), announced the settlement on March 19. According to the terms of the settlement, the SEC will only receive a portion of the penalty after other bankruptcy payments have been made, including claims by retail investors.
The $21 million fine marks the conclusion of the lawsuit filed by the SEC against Gemini and Genesis in January 2023 for selling unregistered securities through the Gemini Earn program. In November 2022, Genesis suspended user withdrawals on its platform, at a time when Gemini Earn had approximately 340,000 customers and $900 million in assets under management, as stated in the SEC announcement.
The fine comes three weeks after Gemini agreed to pay a $37 million penalty for multiple compliance failures that posed a threat to the company’s safety and soundness, as explained by Superintendent Adrienne Harris of the New York State Department of Financial Services (NYDFS) in a statement on February 28. The $37 million penalty is part of the settlement between Gemini and the NYDFS, and it will result in at least $1.1 billion being returned to customers of the Gemini Earn program through the Genesis bankruptcy proceeding.
Gemini stated that if the settlement is approved by the bankruptcy court, Earn users can expect to receive 100% of their cryptocurrency assets back, along with any appreciation they may have gained.
Recharge Capital Managing Partner commented that an Ether ETF is less likely to be approved compared to a Bitcoin ETF.