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Crypto firms Genesis and Gemini charged by SEC with unregistered securities sale

40 points by VagueMag 4y ago

SilasX 4y ago
Related: Some people (such as me[1], shamefully) were asking why the SEC was warning Coinbase that its interest-yielding program would be an unregistered security[2], but not doing the same for Gemini's identical product. Disclosure: I had significant GUSD in Gemini Earn (Gemini's program that lent to Gemini) but by some miracle had my redemption request honored hours before Genesis suspended further requests. [1] https://news.ycombinator.com/item?id=28459949 https://news.ycombinator.com/item?id=28459949 [2] https://news.ycombinator.com/item?id=28453012 https://news.ycombinator.com/item?id=28453012
- coffeebeqn 4y ago
  Do we know they weren’t warned? Coinbase put it on Twitter because it was good press for them. At that point all the other double digit yields including Gemini were already out and I guess they didn’t want to backtrack on their customers
  - SilasX 4y ago
    To clarify, my latest comment didn’t mean to say they weren’t warned. Just the opposite: since they’re being charged now, that contradicts my earlier comment’s assumption that the SEC hadn’t been warning Gemini somehow. Also, I don’t think Gemini ever offered 10% rates on any crypto. They were most famous for the ~8% on the Gemini stablecoin. Though this article mentions them taking as much as 4% percentage points as fees in their lending, which was passed through to Genesis, so the latter may have been charging that much. https://finance.yahoo.com/news/sec-charges-genesis-gemini-with-selling-unregistered-securities-220036368.html https://finance.yahoo.com/news/sec-charges-genesis-gemini-wi...
  - SilasX 4y ago
    Late follow-up: Tyler Winkelvoss, co-founder of Gemini, is claiming that the SEC was in active discussion over most of the time the Earn program was around, and never warned about the possibility of selling unregistered securities: https://twitter.com/tyler/status/1613674687875411969 https://twitter.com/tyler/status/1613674687875411969
    - morpheos137 4y ago
      Ignorance of the law is not a defense. Surely Winklevoi can afford good lawyers to advise them. Likely they knew their product was illegal but hoped to push it anyway in the mob rule mentality that is in the zeitgeist.
      - godzillabrennus 4y ago
        Any “good” lawyer in the United States has told their clients to treat selling crypto assets as selling a security.
      - SilasX 4y ago
        I wasn’t claiming that ignorance of the law is a defense. I was just speaking to the issue of inconsistent behavior in warning one but not the other. See the thread up to that comment — the relevance will be more clear in context.
yokem55 4y ago
There had been chatter that Gemini's Earn product wasn't subject to normal SEC regulation since Gemini was subject to more stringent regulation as a capital-B bank and could offer yield products like any other bank because of that regulatory status. Maybe not. This does feel very much like closing the barn doors after the horses bolted though.
- hgsgm 4y ago
  Quite the opposite. Gemini was sanctioned because they offered both bank and non-bank products but lied to customers, saying they were all bank products.

40 points by VagueMag 4y ago

Related: Some people (such as me[1], shamefully) were asking why the SEC was warning Coinbase that its interest-yielding program would be an unregistered security[2], but not doing the same for Gemini's identical product. Disclosure: I had significant GUSD in Gemini Earn (Gemini's program that lent to Gemini) but by some miracle had my redemption request honored hours before Genesis suspended further requests. [1] https://news.ycombinator.com/item?id=28459949 https://news.ycombinator.com/item?id=28459949 [2] https://news.ycombinator.com/item?id=28453012 https://news.ycombinator.com/item?id=28453012

coffeebeqn 4y ago
Do we know they weren’t warned? Coinbase put it on Twitter because it was good press for them. At that point all the other double digit yields including Gemini were already out and I guess they didn’t want to backtrack on their customers
- SilasX 4y ago
  To clarify, my latest comment didn’t mean to say they weren’t warned. Just the opposite: since they’re being charged now, that contradicts my earlier comment’s assumption that the SEC hadn’t been warning Gemini somehow. Also, I don’t think Gemini ever offered 10% rates on any crypto. They were most famous for the ~8% on the Gemini stablecoin. Though this article mentions them taking as much as 4% percentage points as fees in their lending, which was passed through to Genesis, so the latter may have been charging that much. https://finance.yahoo.com/news/sec-charges-genesis-gemini-with-selling-unregistered-securities-220036368.html https://finance.yahoo.com/news/sec-charges-genesis-gemini-wi...
- SilasX 4y ago
  Late follow-up: Tyler Winkelvoss, co-founder of Gemini, is claiming that the SEC was in active discussion over most of the time the Earn program was around, and never warned about the possibility of selling unregistered securities: https://twitter.com/tyler/status/1613674687875411969 https://twitter.com/tyler/status/1613674687875411969
  - morpheos137 4y ago
    Ignorance of the law is not a defense. Surely Winklevoi can afford good lawyers to advise them. Likely they knew their product was illegal but hoped to push it anyway in the mob rule mentality that is in the zeitgeist.
    - godzillabrennus 4y ago
      Any “good” lawyer in the United States has told their clients to treat selling crypto assets as selling a security.
    - SilasX 4y ago
      I wasn’t claiming that ignorance of the law is a defense. I was just speaking to the issue of inconsistent behavior in warning one but not the other. See the thread up to that comment — the relevance will be more clear in context.

yokem55 4y ago

There had been chatter that Gemini's Earn product wasn't subject to normal SEC regulation since Gemini was subject to more stringent regulation as a capital-B bank and could offer yield products like any other bank because of that regulatory status. Maybe not. This does feel very much like closing the barn doors after the horses bolted though.

hgsgm 4y ago
Quite the opposite. Gemini was sanctioned because they offered both bank and non-bank products but lied to customers, saying they were all bank products.