Yesterday, the Securities and Exchange Commission (SEC) announced an enforcement action against Gemini, a digital asset platform, and Genesis – a subsidiary of Digital Currency Group (DCG). The revelation of the lawsuit arrived at a challenging time for both firms as Gemini is in the midst of a dispute with Genesis – the firm that powered its Earn program. Long story short- Genesis paused its services last November, leaving Gemini users in flux and unable to access their money. A very public dispute emerged between Cameron Winklevoss, a co-founder of Gemini and Genesis/DCG, along with its founder Barry Silbert.
The SEC enforcement action cited the sale of unregistered securities – specifically to retail investors in the US.
Last night, Tyler Winkelvoss, Cameron’s brother, took to Twitter criticizing the SEC for filing the enforcement action as he believes it does nothing to help Earn users get their funds back.
To quote Winklevoss:
As a matter of background, the Earn program was regulated by the @NYDFS, and we’ve been in discussions with the SEC about the Earn program for more than 17 months. They never raised the prospect of any enforcement action until AFTER Genesis paused withdrawals on November 16th.
Despite these ongoing conversations, the SEC chose to announce their lawsuit to the press before notifying us. Super lame. It’s unfortunate that they’re optimizing for political points instead of helping us advance the cause of 340,000 Earn users and other creditors.
We look forward to defending ourselves against this manufactured parking ticket. And we will make sure this doesn’t distract us from the important recovery work we are doing.
As the SEC pursued the same allegations with BlockFi, ending up in a $100 million penalty, expectations are for the SEC Enforcement Division to choose a similar path.
At the same time, the temperature has been rising in regard to the need for greater scrutiny on the part of securities regulators. While the SEC may be feeling pressure for more punitive moves against erstwhile crypto scofflaws – it could also be the SEC was looking to benefit from the high-profile dispute between the two sides, which was playing out on social media, and not behind closed doors which is typically the case.