SEC Lawsuit Against Gemini Is Political, Says Tyler Winklevoss
- Posted on January 13, 2023
- News
- By Mark Otto
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The U.S. Securities and Exchange Commission (SEC) announced on Thursday, January 12 it had filed charges against Genesis Global Capital LLC and Gemini Trust Company LLC. The charges bordered on the illegal sale of unregistered securities to numerous investors through a crypto lending program.
Tyler Winklevoss, a co-founder of Gemini, reacted to the announcement. In his opinion, the Securities and Exchange Commission (SEC) lawsuit will reduce the chances of users receiving their funds. Winklevoss reacting on Twitter, labeled the lawsuit as “rather disappointing.”
Gemini And Genesis History
The Gemini and Genesis saga persists, with both parties engaging in a blame game for the failure of the Earn program. Cameron Winklevoss, a co-founder of Gemini, partnered with Barry Silbert, founder of Digital Currency Group (DCG) that birthed Genesis, to support the program. The Earn program promised returns of around 8% on customer deposits.
Gemini loaned customers’ deposits to Genesis through the earning program for trading and lending activities. Gemini sent their customers’ $900 million worth of crypto to Genesis for these transactions. The crypto boom in 2020 and 2021 sustained the Earn business model, and customers quickly received rewards.
However, in 2022 the crypto winter gripped the entire market, with borrowers failing to repay their loans. The FTX crisis sent the market into further chaos costing investors billions of dollars. The collapse of FTX sparked a wave of withdrawals across exchanges that forced Genesis to freeze new loans and suspend withdrawals.
With withdrawals on Earn halted since November 2022, over 340,000 participants became angry, leading some to file class action lawsuits. Cameron Winklevoss has blamed Barry Silbert publicly for the insolvency writing an open letter to him on Twitter.
Winklevoss’s main talking point hinges on a loan that Silbert offered to Genesis from the DCG group after the collapse of Three Arrows Capital (3AC). The 3AC firm defaulted on a $1 billion loan it owes Genesis, and Silbert stepped in to prevent insolvency with an intercompany loan.
Silbert assured Gemini that the intercompany loan would not cause further financial problems. However, the saga has dragged on as Winklevoss blames the Earn program collapse on Silbert calling for his resignation.
Digital Currency Group (DCG) recently labeled the accusations from Cameron Winklevoss as desperate and a publicity stunt on Twitter.
The SEC has waded into the matter, filing a lawsuit against both firms. Gary Gensler, Securities and Exchange Commission (SEC) chairman, stated that the charges are built on previous actions of crypto firms. The SEC intends to enforce its stance that lending platforms must abide by security laws.
SEC Classifies Gemini Earn Program Under securities
In their lawsuit, the Securities and Exchange Commission (SEC) alleged that Gemini and Genesis sold unregistered assets classified as securities. The Securities and Exchange Commission (SEC) stated that the earning program includes an investment contract and a note in the document. According to the Securities and Exchange Commission (SEC), these two items make the Earn program a security.
The Securities and Exchange Commission (SEC) lawsuit against Gemini and Genesis seeks injunctive relief and other civil penalties against the firms. The two crypto giants are locked in a war of words, with this recent lawsuit viewed as a setback.
Source: Bitcoinist.com
