Gemini Faces Regulatory Scrutiny Over Earn Lending Program

Gemini, a leading cryptocurrency exchange, is facing intensified scrutiny from regulators as cases involving its Earn lending program continue to unfold. At the center of attention are allegations of undisclosed Genesis risks and unregistered securities offerings.

The U.S. Securities and Exchange Commission (SEC) filed charges against Gemini and Genesis in January 2023, alleging that the companies offered unregistered securities through Gemini Earn. The SEC also cited a November 2022 withdrawal freeze affecting approximately $900 million across roughly 340,000 participants.

Separately, New York Attorney General Letitia James has pursued a case against Gemini, alleging that the company failed to disclose material Genesis risks, including an internal downgrade from BBB to CCC in early 2022. The revised complaint sought more than $3 billion in damages and alleged 'secret transformations' within the company.

The class action lawsuit targets Gemini and the Winklevoss brothers, with claims remaining unproven at this stage. Investors may face restitution through regulatory settlements or private litigation, which could yield different outcomes and timelines from government enforcement cases.