Rich by Coin

The SEC on Friday filed a joint stipulation with Gemini Trust Company, LLC to dismiss, with prejudice, the Commission’s ongoing civil enforcement action against it. As stated in the joint stipulation, the Commission’s decision to seek dismissal of this action is “in the exercise of its discretion,” and takes into account the “100 percent in-kind return of Gemini Earn investors’ crypto assets,” as well as state and regulatory settlements involving Gemini related to the Gemini Earn program. The Commission’s decision also “does not necessarily reflect the Commission’s position on any other case,” as stated in the joint stipulation.

In January 2023, the SEC charged Genesis Global Capital, LLC and Gemini Trust Company, LLC for the unregistered offer and sale of securities to retail investors through the Gemini Earn crypto asset lending program. Through this unregistered offering, Genesis and Gemini raised billions of dollars’ worth of crypto assets from hundreds of thousands of investors. According to the SEC’s complaint, in December 2020, Genesis, part of a subsidiary of Digital Currency Group, entered into an agreement with Gemini to offer Gemini customers, including retail investors in the United States, an opportunity to loan their crypto assets to Genesis in exchange for Genesis’ promise to pay interest. Beginning in February 2021, Genesis and Gemini began offering the Gemini Earn program to retail investors, whereby Gemini Earn investors tendered their crypto assets to Genesis, with Gemini acting as the agent to facilitate the transaction.

Gemini deducted an agent fee, sometimes as high as 4.29 percent, from the returns Genesis paid to Gemini Earn investors. As alleged in the complaint, Genesis then exercised its discretion in how to use investors’ crypto assets to generate revenue and pay interest to Gemini Earn investors. In November 2022, Genesis announced that it would not allow its Gemini Earn investors to withdraw their crypto assets because Genesis lacked sufficient liquid assets to meet withdrawal requests following volatility in the crypto asset market.

At the time, Genesis held approximately $900 million in investor assets from 340,000 Gemini Earn investors. Gemini terminated the Gemini Earn program in January 2023.