The SEC wants to “make it clear to the market and investors that cryptocurrency lending platforms and other intermediaries must abide by the laws of the stock market,” its chairman Gary Gensler commented in the press release.
The U.S. securities regulator, the SEC, filed a lawsuit on Thursday against cryptocurrency firms Genesis and Gemini for offering to lend in cryptocurrency without registering with the relevant authorities.
However, the two companies have, through this offering, “raised billions of dollars of cryptocurrency assets from hundreds of thousands of investors,” the SEC said in a press release.
An industry under pressure
Other charges related to this story could be announced later, the agency said, which is now trying to demonstrate that it regulates the sector well after the turmoil caused by the bankruptcies of FTX and Alameda Research.
Their founder, Sam Bankman-Fried, is accused of having stolen funds deposited by customers on the FTX platform, to use them, without their authorization, in risky financial transactions through Alameda.
Genesis, a subsidiary of Digital Currency Group, presents itself as a cryptocurrency brokerage platform for professional investors.
Founded by the Winklevoss brothers, popularized by film The social network on the genesis of Facebook, Gemini offers the general public various financial products related to cryptocurrencies.
Millions of dollars
According to the SEC complaint, the two companies entered into an agreement in late 2020 under which Genesis would offer Gemini customers the ability to lend out their cryptocurrencies for interest, in a program called Gemini Earn. Gemini has taken commissions along the way, while Genesis has used cryptocurrencies at its discretion.
But Genesis, hit by the bankruptcy of FTX and Alameda, suspended the ability for lenders to withdraw their cryptocurrencies in November.
The SEC says Genesis held about $900 million in cryptocurrencies borrowed from about 340,000 customers.
The agency believes that Gemini Earn is actually similar to fundraising on the marketplaces and as such should have been registered with its services. This process should protect investors by making much information public.