2026-01-23 sec-litreleases complaint 390 KB 39,652 chars

SEC v. Genesis Global Capital, LLC; and Gemini Trust Company, LLC, No. 1:23-cv-00287, Southern District of New York (Jan. 23, 2026) — Complaint

raw: SEC v. GENESIS GLOBAL CAPITAL

SEC v. GENESIS GLOBAL CAPITAL, No. 1:23-cv-00287 (S.D.N.Y. Jan. 23, 2026)

Caption: Securities and Exchange Commission v. Genesis Global Capital, LLC

Enriched metadata

Scheme: unregistered-securities (100%)
Court: Southern District of New York
Case No.: 1:23-cv-00287
Victim loss: $900,000,000
Entity: Genesis Global Capital, LLC

Classified unregistered-securities(confidence 100%). EDGAR detection: forms Form D/S-1· recall 41% / precision 30%. detection rule →

Extracted insights

Dollar amounts 5

$900.00M $900 million $100M–$1B
$575.00M $575 million $100M–$1B
$169.80M $169.8 million $100M–$1B
$2.70M $2.7 million $1M–$10M
$166 $166.2 <$10K

Entities 11

person agent fee
person crypto assets
person gemini earn agreements
person gemini earn program
person institutional borrowers
person interest payments
person investors assets
person investors enter into agreement
person material information
person significant harm
company unregistered offer and sale of securities

Triples 33

Genesis engaged in unregistered offer and sale of securities
Gemini engaged in unregistered offer and sale of securities
Genesis called Gemini Earn program
Investors tendered crypto assets
Genesis promised to pay interest on those assets
Defendants raised billions of dollars worth of crypto assets
Genesis was issuer
Genesis received investors assets
Genesis pooled investors assets
Genesis deployed investors assets
Genesis paid interest investors assets
Genesis marketed Gemini Earn program
Gemini marketed Gemini Earn program
Gemini provided access to Genesis
Defendants profited from partnership
Defendants profited from offering
Genesis required investors enter into agreement
Gemini acted as agent
Genesis sent interest payments
Gemini deducted Agent Fee
Gemini distributed remainder of interest payments
Genesis pooled crypto assets
Genesis deployed crypto assets
Genesis lent crypto assets
Institutional Borrowers received crypto assets
Genesis earned revenue by lending crypto assets
Genesis offered Gemini Earn Agreements
Gemini offered Gemini Earn Agreements
Defendants offered and sold Gemini Earn Agreements
Defendants offered and sold Gemini Earn Agreements without registering
Investors lacked material information
Defendants made selective and inadequate disclosures
U.S. retail investors suffered significant harm

PDF

SEC v. GENESIS GLOBAL CAPITAL · Source

Text layers

Extracted body text (39,652c)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK

23-cv-287

ECF Case

Complaint
Jury Trial Demanded

Plaintiff Securities and Exchange Commission (the “Commission” or “SEC”) files this

Complaint against Genesis Global Capital, LLC (“Genesis”) and Gemini Trust Company, LLC

(“Gemini”) (collectively, “Defendants”) and alleges as follows:

SUMMARY

1. Between February 2021 and November 2022, Genesis and Gemini engaged in an

unregistered offer and sale of securities to U.S. retail investors, in violation of the federal

securities laws. Through an investment opportunity that Defendants called the “Gemini Earn”

program, investors tendered crypto assets to Genesis and, in exchange, Genesis promised to pay

interest on those assets to investors. Through this unregistered offering, Defendants raised

billions of dollars’ worth of crypto assets, principally from U.S. retail investors.

2. Both Defendants were integral to the operation and success of the Gemini Earn

program. Genesis was the issuer and entity that received, pooled, deployed, and paid interest on

investors’ assets. Genesis and Gemini marketed the Gemini Earn program through social media

and Gemini’s website, touting the high interest rates that investors could earn through Gemini

Earn. And Gemini provided retail investors with access to Genesis, which otherwise only

SECURITIES AND EXCHANGE
COMMISSION,

Plaintiff,

GENESIS GLOBAL CAPITAL, LLC and
GEMINI TRUST COMPANY, LLC,

Defendants.

engaged in crypto asset transactions with large institutional and other accredited investors.1

Crucially, both Defendants profited from the partnership and offering.

3. To participate in the Gemini Earn program, Genesis and Gemini required that

investors enter into a tri-party Master Digital Asset Loan Agreement with Genesis and Gemini

(“Gemini Earn Agreement”), whereby Gemini Earn investors provided crypto assets to Genesis,

with Gemini acting as the agent in the issuance. Genesis would send interest payments to

Gemini, which would then deduct an “Agent Fee” before distributing the remainder of the

interest payments to Gemini Earn investors.

4. Genesis pooled the crypto assets from Gemini Earn investors with assets from

other investors. Genesis then deployed the crypto assets – primarily by lending the crypto assets

to institutional counterparties (“Institutional Borrowers”) – in order to generate revenue for its

business, including the revenue necessary to pay interest to Gemini Earn investors. Genesis

earned revenue by lending the crypto assets at a higher rate than it paid to Gemini Earn and other

investors.

5. The Genesis Earn Agreements, as offered and sold through the Gemini Earn

program, were securities that Genesis and Gemini offered and sold to the investing public.

6. Defendants offered and sold the Gemini Earn Agreements through the Gemini

Earn Program without registering the offer and sale with the SEC as required by the federal

securities laws. As a result, investors lacked material information about the Gemini Earn

program that would have been relevant to their investment decisions. Instead of providing

investors with the full panoply of information required by the federal securities laws, Defendants

1 “Accredited investors” are those persons whose financial sophistication and ability to sustain the risk of
loss of investment or fend for themselves render the protections of the Securities Act of 1933’s
registration process unnecessary. See Rule 501(a) of the Securities Act of 1933 [17 C.F.R. § 230.501].

have instead only made selective and inadequate disclosures.

7. The U.S. retail investors who participated in the Gemini Earn program have

suffered significant harm. In November 2022, Genesis unilaterally announced that it would not

allow hundreds of thousands of retail investors to withdraw their crypto assets from Gemini Earn

because of “withdrawal requests which have exceeded our current liquidity” following volatility

in the crypto asset market. At the time, Genesis held approximately $900 million in investor

assets from approximately 340,000 Gemini Earn investors, most residing in the United States. As

of the date of this Complaint, these retail investors still cannot withdraw their assets, and Genesis

has formed a special committee to oversee a restructuring process.

8. While the Gemini Earn program has been terminated, both Genesis and Gemini

continue to do business in the crypto asset industry. In particular, Genesis intends to reengage in

crypto asset lending activities. Gemini continues to hold billions of dollars’ worth of crypto

assets on behalf of retail investors in connection with its trading platform and other activity in

this industry. Thus, Defendants remain positioned to violate the registration provisions if they are

not enjoined from doing so.

VIOLATIONS

9. By engaging in the conduct described in this Complaint, Defendants violated

Sections 5(a) and 5(c) of the Securities Act [15 U.S.C. §§ 77e(a) and 77e(c)].

10. Unless Defendants are permanently restrained and enjoined, they will continue to

engage in the acts, practices, and courses of business set forth in this Complaint and in acts,

practices, and courses of business of similar type and object.

NATURE OF THE PROCEEDING AND RELIEF SOUGHT

11. The Commission brings this action pursuant to the authority conferred upon it by

Section 20(b) of the Securities Act [15 U.S.C. § 77t(b)].

12. The Commission seeks a final judgment: (a) permanently enjoining Defendants

from violating Sections 5(a) and 5(c) of the Securities Act, pursuant to Section 20(b) of the

Securities Act [15 U.S.C. § 77t(b)]; (b) ordering Defendants to disgorge their ill-gotten gains and

to pay prejudgment interest thereon, pursuant to Sections 21(d)(3), (d)(5), and (d)(7) of the

Securities Exchange Act of 1934 (“Exchange Act”) [15 U.S. Code § 78u(d)(3), (5), (7)]; and (c)

imposing civil money penalties on Defendants pursuant to Section 20(d) of the Securities Act [15

U.S.C § 77t(d)].

JURISDICTION AND VENUE

13. This Court has jurisdiction over this action pursuant to Section 22(a) of the

Securities Act [15 U.S.C. § 77v(a)].

14. Defendants, directly or indirectly, have made use of the means or instruments of

transportation or communication in interstate commerce or of the mails in connection with the

transactions, acts, practices, and courses of business alleged herein.

15. Venue is proper in the Southern District of New York pursuant to Section 22(a) of

the Securities Act [15 U.S.C. § 77v(a)]. Gemini’s principal place of business is in this District,

and Defendants sold the securities at issue in this case to investors residing in this District.

DEFENDANTS

16. Genesis Global Capital, LLC (“Genesis”) is a Delaware limited liability

company formed in 2017 and a wholly owned subsidiary of Genesis Global Holdco, LLC, which

is wholly owned by Digital Currency Group, Inc. (“DCG”). Genesis’ principal place of business

is in Jersey City, New Jersey. Genesis claims that it is the “premier institutional digital asset

financial services firm,”2 and “the world’s largest digital asset lender” and that “[h]olders of digital

currencies can earn yield on their assets by lending directly to Genesis, a regulated and trusted

counterparty.” Genesis is registered with FinCEN as a money services business (i.e., money

transmitter). Genesis is one of several companies that DCG operates under the “Genesis” brand.

Genesis is the issuer of securities under the Gemini Earn program.

17. Gemini Trust Company, LLC (“Gemini”) is a New York limited liability trust

company founded in 2014. Gemini is beneficially owned and controlled by Cameron and Tyler

Winklevoss through Winklevoss Capital Fund, LLC. Gemini’s principal place of business is in

New York, New York. Gemini is registered as a New York limited purpose trust company with

the New York State Department of Financial Services (“NYSDFS”).

STATUTORY AND REGULATORY FRAMEWORK

18. The Securities Act sets forth a longstanding regime of full and fair disclosure in

connection with the offer and sale of securities, in contrast to traditional commercial principles

of caveat emptor. Congress mandated that persons who offer and sell securities to the investing

public provide sufficient, accurate information to allow investors to make informed decisions

before they invest.

19. The definition of a “security” under the Securities Act includes a wide range of

investment vehicles, including “investment contracts” and “notes.” An investment contract is an

investment of money in a common enterprise with a reasonable expectation of profits derived

from the entrepreneurial or managerial efforts of others. Congress defined “security” broadly to

embody a “flexible rather than a static principle, one that is capable of adaptation to meet the

countless and variable schemes devised by those who seek the use of the money of others on the

2 A “digital asset” is another term for crypto asset.

promise of profits.” SEC v. W.J. Howey Co., 328 U.S. 293, 299 (1946). According to the

Supreme Court, the broad definition of “security” is “sufficient to encompass virtually any

instrument that might be sold as an investment,” because “Congress’ purpose in enacting the

securities laws was to regulate investments, in whatever form they are made and by whatever

name they are called.” SEC v. Edwards, 540 U.S. 389, 393 (2004) (citations and internal

quotation marks omitted) (emphasis in original). Courts have found that novel or unique

investment vehicles constitute investment contracts, including interests in orange groves, animal

breeding programs, railroads, mobile phones, and enterprises that exist only on the Internet,

including crypto assets.

20. Sections 5(a) and 5(c) of the Securities Act require that an issuer like Genesis

from engaging in the offer and sale of such unregistered securities. Registration statements

relating to an offering of securities provide public investors with material information about the

issuer and the offering, including but not limited to financial and managerial information, how

the issuer will use offering proceeds, and the risks and trends that affect the enterprise and an

investment in its securities.

BACKGROUND ON CRYPTO ASSETS

21. The term “crypto asset” generally refers to an asset that is issued and transferred

using distributed ledger or blockchain technology, including, but not limited to, so-called

“cryptocurrencies,” “coins,” and “tokens.”

22. A blockchain or distributed ledger is a peer-to-peer database spread across a

network of computers that records all transactions in theoretically unchangeable, digitally

recorded data packages. The system relies on cryptographic techniques for secure recording of

transactions.

FACTS

I. Genesis and Gemini Offered and Sold Investments

23. In March 2018, Genesis began obtaining crypto assets from large institutional and

other accredited investors in exchange for a promise to pay interest on those investors’ crypto

assets. Genesis obtained crypto assets from its various investors for the use of its primary

business – i.e., to lend crypto assets to Institutional Borrowers for interest – which generated

revenue for Genesis and allowed it to pay interest to large institutional and other accredited

investors. Genesis earned profit by lending the crypto assets to Institutional Borrowers at a

higher rate than it paid to its investors. Genesis pooled the investors’ crypto assets and exercised

discretion over how to deploy the assets to earn income.

24. Eventually, Genesis expanded its business model to transact with not just

institutional and accredited investors, but also retail investors. In particular, in December 2020,

Genesis entered into an agreement with Gemini to offer Gemini customers, including U.S. retail

investors, an opportunity to tender their crypto assets to Genesis in exchange for Genesis’

promise to pay interest.

Gemini Earn Program

25. Specifically, beginning in February 2021, Genesis and Gemini began offering the

Gemini Earn program to retail investors in the United States and Hong Kong, and later

Singapore. There was no minimum investment amount to be eligible to participate in the Gemini

Earn program. As of November 16, 2022, approximately 340,000 retail investors, most residing

in the United States, had crypto assets invested with Genesis through the Gemini Earn program.

By November 2022, the value of retail investors’ crypto assets held by Gemini exceeded the

collective value of those tendered by institutional and accredited investors.

26. Each Gemini Earn investor entered into a tri-party Gemini Earn Agreement with

Gemini and Genesis. The agreement was a standard agreement and not individually negotiated

with Gemini Earn investors. Under the terms of the Gemini Earn Agreement, Gemini Earn

investors first needed to hold eligible crypto assets with Gemini – either by transferring the

crypto assets to Gemini or acquiring them via Gemini’s crypto asset trading platform. Through

Gemini Earn, investors would then tender their crypto assets to Genesis, with Gemini acting as

the agent for retail investors to facilitate the transaction. Gemini aggregated the crypto assets to

be invested in the Gemini Earn program and placed them in a digital wallet from which Genesis

would take possession of the assets.

27. Genesis determined the types and aggregate amount of each crypto asset that were

eligible to be invested by Gemini Earn investors. Genesis offered and agreed to pay the Gemini

Earn investors in-kind interest on the crypto assets they had invested, which accrued on a daily

basis. Genesis could unilaterally revise the interest rates and the aggregate amount of each crypto

asset that Gemini Earn investors could invest, on a monthly basis.

28. Gemini Earn investors’ returns came from Genesis, with Gemini deducting an

Agent Fee from the returns. Genesis had sole discretion over the gross interest rate that it paid for

each crypto asset, while Gemini had sole discretion over its Agent Fee and thus the net rates of

return offered to Gemini Earn investors.

29. Gemini published the list of crypto assets eligible for investment and the interest

rates offered to Gemini Earn investors on its website as well as in Gemini’s mobile application

(“app”). More than 50 crypto assets were eligible to be invested in the Gemini Earn program,

including Bitcoin, Ether, USD Coin, and Dogecoin.

30. As of October 2022, the net interest rate offered to Gemini Earn investors ranged

from 0.45% to 8.05%, while Gemini’s Agent Fee ranged from 0.06% to 4.29%, depending on the

type of crypto asset tendered to Genesis. For the three months ended March 31, 2022, Gemini

received approximately $2.7 million in Agent Fees from the Gemini Earn program.

31. The Gemini Earn Agreement provided that the crypto asset transactions were

“open term” unless otherwise specified, and Gemini Earn investors could terminate all, or a

portion, of their investment in Gemini Earn at any time with no withdrawal fee. Per the Gemini

Earn Agreement, Genesis was also obligated to return the invested crypto assets within three

business days of an investor’s request for repayment to a digital wallet controlled by Gemini, and

Gemini would then transfer the crypto assets and any accrued interest to the investor’s Gemini

account where the assets and interest would be available for withdrawal. The Gemini Earn

Agreement also provided that Genesis was responsible for repaying the crypto assets and all

accrued interest to the Gemini Earn investors.

32. Under the terms of the Gemini Earn Agreement, a failure by Genesis to return

crypto assets or a failure by Genesis to pay interest or late fees to a Gemini Earn investor is

considered an event of default. In the event of a default, Gemini may declare the entire Gemini

Earn balance payable, transfer any collateral to hold on behalf of itself and the Gemini Earn

investors, and/or exercise all other rights and remedies available. If the event of default persists

for 30 days or more, Gemini may terminate the Gemini Earn Agreement.

Genesis and Gemini Promoted Gemini Earn as an Investment

33. Genesis and Gemini both touted the profits investors could earn by investing their

crypto assets with Genesis through Gemini Earn. Genesis advertised on its public website that

“[h]olders of digital currencies can earn yield on their assets by lending directly to Genesis.”

Genesis also published tweets highlighting its partnership with Gemini and the yield that Gemini

Earn investors – i.e., retail investors – could earn. For example, on February 2, 2021, Genesis

published a tweet stating, “Genesis is dedicated to building and partnering to lower barriers to

digital asset markets.”

34. Gemini similarly promoted the profit that investors could earn through the Gemini

Earn program. In a February 2021 press release launching Gemini Earn, Gemini CEO Tyler

Winklevoss stated, “We designed a program that allows our customers the ability to generate a

real return on their crypto holdings.” On February 27, 2021, Gemini also posted a video on

YouTube titled, “Invest Better with Gemini Earn.” On its website, Gemini described how users

would earn interest, noting, “We are excited to launch Gemini Earn and offer more opportunities

for you to grow your portfolio and earn yield.” Similarly, Gemini advertised on its website that

investors could “[p]ut your crypto to work. With Gemini Earn, you can receive up to 8.05% APY

on your cryptocurrency,” and listed the interest rate that investors could earn for each eligible

crypto asset. Gemini also published tweets, including on May 26, 2021, promoting the high

interest rates offered via Gemini Earn, with statements such as the following:

35. Gemini itself repeatedly described Gemini Earn as an investment on its website.

For example, Gemini included this description in an FAQ entitled, “What are the risks of Gemini

Earn?”:

Cryptocurrency, like many assets, can be volatile and subject to price
swings. There is always a risk in investing, and each customer needs to
assess their own risk tolerance before making any investment decisions. Our
partners in Gemini Earn have an obligation to return funds according to the
terms of their loan agreement. However, Gemini Earn customers (the
lenders) always assume some level of risk when they decide to lend their
funds. We believe Gemini Earn gives our retail investors another way to
stay long-term in the asset class and have the option to invest and earn
interest, all on the Gemini platform.

(emphasis added)

36. Gemini’s website also claimed that Gemini Earn investors could “receive more

than 100x the average national interest rate, among the highest rates on the market” and that

Gemini Earn “offer[s] more flexibility than other yield-generating cryptocurrency investments.”

37. Additionally, Gemini’s website featured a calculator that would allow a user to

select a deposit amount, crypto asset type, and a time frame to see how much interest could be

earned by tendering crypto assets through Gemini Earn. The calculator would reveal the

projected amount of interest that could be earned by investing the investor’s crypto assets for a

period between one and four years.

Genesis’ Deployment of the Invested Gemini Earn Crypto Assets

38. Genesis pooled on its balance sheet the crypto assets that it received from the

Gemini Earn investors and other investors, and in practice did not segregate the crypto assets it

received from different groups of investors. Genesis retained possession and control over the

investors’ crypto assets on its balance sheet, and determined how much to hold, lend out to

others, and otherwise use. Genesis exercised its discretion in how to use investors’ crypto assets

to generate revenue for its business and to pay the interest rates it promised Gemini Earn

investors and other investors. The Gemini Earn Agreement did not contain any explicit terms

restricting how investors’ crypto assets would be used by Genesis.

39. Generally, Genesis deployed the Gemini Earn investors’ crypto assets by either

lending them to Institutional Borrowers or using the assets as collateral for Genesis’ own

borrowing. Crypto assets not loaned to Institutional Borrowers or used for collateral were held

by Genesis on its balance sheet in an effort to provide Genesis with liquidity to meet potential

demand for loans as well as to repay the investors in its crypto asset program, including Gemini

Earn. Genesis also had the ability to loan the crypto assets to related parties, including its parent

company.

40. Genesis employed its discretion and judgment in determining the terms of

transactions with Institutional Borrowers. For example, Genesis conducted due diligence on the

Institutional Borrowers before entering into a transaction. Genesis negotiated an initial

agreement with each Institutional Borrower, and then individually negotiated the terms –

including the type of crypto assets to be lent, interest rate, duration of the loan, and collateral (if

any) – of every subsequent lending transaction. Genesis separately evaluated each Institutional

Borrower, as well as market conditions, when determining collateral rates.

41. The returns earned by each Gemini Earn investor were reliant on the pooling of

the invested crypto assets and the ways in which Genesis deployed those assets, including

Genesis’ evaluation of the Institutional Borrowers, negotiation of favorable terms, and

management of market and counterparty risk. When Genesis loaned crypto assets it received

through the Gemini Earn program, the assets were transferred to the Institutional Borrowers and

left Genesis’ balance sheet. Ultimately, the returns of Gemini Earn investors were dependent on

Genesis’ managerial efforts and risk management in its lending activities.

42. The interest income that Genesis received from lending crypto assets to

Institutional Borrowers was used to generate revenue for Genesis and to pay the promised

interest to Gemini Earn investors and other investors. Genesis did not have any other revenue-

generating activities. For example, for the three months ended March 31, 2022, Genesis received

approximately $169.8 million in interest income from Institutional Borrowers and paid $166.2

million in interest to the investors in its crypto asset program, including Gemini Earn.

43. Genesis also loaned an additional $575 million worth of crypto assets, including

those of Gemini Earn investors, to related party DCG, which DCG used to fund investment

opportunities and repurchase DCG stock from non-employee shareholders in secondary

transactions.

II. The Gemini Earn Program Constituted an Offer and Sale of Securities

A. The Gemini Earn Program Constituted an Offer and Sale of Securities Under
Reves

44. Under Section 2(a)(1) of the Securities Act, the definition of a security includes

any “note.” See 15 U.S.C. §§ 77b, 78c. A note is presumed to be a security unless it bears a

strong resemblance to instruments that are not securities, which courts determine by examining

four factors: (1) the motivation of the parties; (2) the plan of distribution; (3) the expectations of

the investing public; and (4) the availability of an alternative regulatory regime that “significantly

reduces the risk of the instrument” for investors other than the securities laws, “thereby rendering

application of the Securities Acts unnecessary.” See Reves v. Ernst & Young, 494 U.S. 56, 64–69

(1990). Under Reves, the Gemini Earn Agreements were notes and offered and sold through

Gemini Earn as securities.

1. The Purpose of the Gemini Earn Program

45. Genesis offered the Gemini Earn program to obtain crypto assets for the use of its

business – namely, to run its institutional lending activities, generate profits for itself, and to pay

the interest promised to Genesis investors, and investors in Gemini Earn were primarily

interested in the profit they expected the program to generate.

46. Genesis controlled the crypto assets it obtained from investors and had complete

discretion in determining how much to hold, lend and otherwise use. Genesis used the crypto

assets it raised from Gemini Earn investors and other investors to make loans to Institutional

Borrowers or as collateral for Genesis’ own borrowing. Genesis also had the discretion to hold

the assets on its balance sheet to provide Genesis with liquidity to meet potential demand for

loans as well as to repay the investors in its crypto asset program.

47. In turn, investors participated in the Gemini Earn program primarily for profit,

i.e., to receive a return on their crypto assets. Genesis and Gemini both touted the profits

investors could earn by investing their crypto assets with Genesis, including by advertising

Gemini Earn as an investment and touting that investors could receive up to 8.05% annual

percentage yield (“APY”) on their crypto assets. Investors who purchased the Gemini Earn notes

were led to expect that by tendering and giving control over their crypto assets to Genesis, they

would receive profit in the form of interest on those assets.

48. In short, Genesis intended to use the crypto assets for its business and its sole

source of revenue, and the Gemini Earn investors were primarily motivated to earn a profit on

their crypto assets in the form of interest.

2. The Gemini Earn Program was Offered and Sold to a Broad Segment of the
Public

49. Genesis and Gemini publicly advertised the Gemini Earn Agreements, through

Gemini Earn, on websites and on social media. Moreover, the Gemini Earn Agreements were

offered and sold to any U.S. investor, including retail investors. As of November 16, 2022, there

were approximately 340,000 retail investors, the majority of whom resided in the United States,

who had crypto assets invested with Genesis through the Gemini Earn program. The Gemini

Earn Agreements were offered and sold to a broad segment of the general public.

3. The Investing Public Considered these Notes as Investments

50. Genesis and Gemini, through websites and social media, promoted Gemini Earn

as an investment, specifically as a way to earn high “returns” or “yield” on investors’ crypto

assets. Gemini repeatedly described Gemini Earn as an investment on its own website and social

media and repeatedly touted that the Gemini Earn interest rates were “among the highest rates on

the market” and “higher than most existing options.” Gemini’s website further claimed that

Gemini Earn investors could “receive more than 100x the national interest rate.” Gemini’s

website also included a calculator that showed a user potentially how much interest they could

earn by investing their crypto assets in the Gemini Earn program for a period between one and

four years. The economic realities of the transaction, in which investors had an opportunity to

tender crypto assets with Genesis in exchange for earning interest with some of the “highest

rates” available for crypto assets, further underscore why the investing public considered the

Gemini Earn program to be an investment opportunity.

4. No Alternative Regulatory Regime or Risk-Reducing Factors Exist to Protect
Gemini Earn Investors

51. No alternative regulatory scheme or risk-reducing factors existed to protect

investors with respect to the Gemini Earn program. In its own FAQs, Genesis noted that

“[D]igital assets are not covered by SIPC insurance” and that “[e]stablishing a lending and

borrowing relationship with Genesis is not the same as opening a depository account or a savings

account” and that “[a]ccounts with Genesis do not enjoy FDIC protection.” Genesis Global

Trading, Inc., the SEC registered broker-dealer affiliated with Genesis, did not have a role in the

Gemini Earn program. Although Genesis has registered as a money services business (“MSB”)

with FinCEN, the anti-money laundering and recording keeping and reporting requirements of an

MSB – designed to prevent money services business from being used to facilitate money

laundering and the financing of terrorist activities – do not provide the significant disclosures and

other investor protections afforded by the federal securities laws.

52. Similarly, although Gemini is registered with NYSDFS as a New York limited

purpose trust company, NYSDFS did not have oversight over Genesis. Gemini publicly stated

that Gemini Earn does not operate like a traditional bank account, is not protected by a

governmental program, and is not backed by Gemini itself. In a February 2021 press release

launching Gemini Earn, Gemini stated that “Gemini Earn is not a depository account. . . . Loans

are not insured by Gemini or any governmental program or institution.” Likewise, on its website,

Gemini noted that “Gemini Earn is structured similarly to non-deposit services offered by

financial institutions and not insured by FDIC, SIPC, any other governmental program, or

Gemini.”

53. Any capital reserve requirements applicable to Gemini did not apply to Genesis or

to the crypto assets tendered to Genesis through Gemini Earn.

54. Under the terms of the Gemini Earn Agreement, Genesis was not required to post

collateral. Gemini told investors, “All lending by you through our Program will be on an

unsecured basis. We will not collect or hold collateral from Borrowers, nor maintain any

collateral account for your benefit.” Although Genesis later provided some collateral to Gemini

in August 2022, the collateral Genesis provided to Gemini was in the form of restricted shares

that could not be liquidated immediately and amounted to only a fraction of the total investor

assets held in Gemini Earn.

55. As evidenced by the current state of Gemini Earn, where investors have been

unable to access their crypto assets or any form of collateral since November 16, 2022, any

oversight of Genesis as an MSB and Gemini as a limited purpose trust company did not

adequately reduce the risk of significant harm to Gemini Earn retail investors.

B. The Gemini Earn Program Constituted the Offer and Sale of Investment
Contracts under Howey

56. The offer and sale of Gemini Earn Agreements through the Gemini Earn program

also constitutes the offer and sale of investment contracts under Howey.

1. Gemini Earn Involved the Investment of Money

57. The Gemini Earn program involved an investment of money. Between February

2021 and November 2022, Genesis raised billions of dollars from hundreds of thousands of retail

investors, who tendered crypto assets to Genesis through the program.

2. Gemini Earn Investors and Defendants Invested in a Common Enterprise

58. Investors in Gemini Earn invested in a common enterprise with other investors

and with Defendants.

59. Genesis pooled Gemini Earn investors’ and other investors’ crypto assets on

Genesis’ balance sheet, and used those assets in order to generate returns for both Genesis and

investors, including Gemini Earn investors. Genesis did not manage individual or separate

accounts for each investor in Gemini Earn. Instead, the returns earned by each investor were

reliant on the pooling of the invested crypto assets. As the invested crypto assets were not

segregated in any way by Genesis, each investor’s fortune was tied to the fortunes of the other

investors.

60. Gemini Earn investors’ fortunes were also tied to Genesis’ fortunes; both Genesis

and Gemini Earn investors earned profits when Genesis deployed the pooled assets. Moreover,

Genesis’ current situation, where it has experienced withdrawal requests that exceed its current

liquidity and has consequently restricted Gemini Earn investors from withdrawing their crypto

assets and begun a restructuring process, further demonstrates that the fortunes of Genesis and

the fortunes of each Gemini Earn investor are tied to one another in a common enterprise.

3. Gemini Earn Investors Reasonably Expected to Profit From the Efforts of
Defendants

61. Investors in the Gemini Earn program reasonably expected to profit from the

efforts of Defendants.

62. From its inception, Defendants have explicitly marketed the Gemini Earn

program as an investment opportunity which led investors to reasonably expect to profit from

their efforts. As detailed above, through their websites and social media channels, both Genesis

and Gemini publicly touted the ability for investors to earn yield or returns via Gemini Earn.

Gemini repeatedly itself described Gemini Earn as an investment on its own website; repeatedly

touted that the Gemini Earn interest rates were “among the highest rates on the market” and that

Gemini Earn investors could “receive more than 100x the national interest rate”; and Gemini’s

website illustrated how much interest Gemini Earn investors could potentially earn by investing

their crypto assets for a period between one and four years.

63. Genesis also described itself as the “premier institutional digital asset financial

services firm,” and “the world’s largest digital asset lender” and that “[h]olders of digital

currencies can earn yield on their assets by lending directly to Genesis, a regulated and trusted

counterparty.” Accordingly, Gemini Earn investors were led to expect that Defendants’ efforts to

generate the investment returns – i.e., the promised interest – would result in profit for investors.

64. As part of the Gemini Earn Agreements, investors ceded control over their crypto

assets to Genesis, who has complete discretion in deploying the crypto assets. Genesis, not

investors, undertook various complex tasks of pooling Gemini Earn crypto assets, identifying

Institutional Borrowers to serve as counterparties, negotiating individual agreements with those

counterparties, and managing market and counterparty risk. Investors understood that Genesis

would conduct due diligence on Institutional Borrowers and evaluate market conditions in

determining the appropriate collateral levels.

65. Moreover, the economic realities of the Gemini Earn program demonstrate that

Genesis was motivated to use its experience and skill as the “premier institutional digital asset

financial services firm” and its economic power as “the world’s largest digital asset lender ” to

select appropriate Institutional Borrowers to serve as counterparties, negotiate for the highest

interest rates from those Institutional Borrowers, and set appropriate collateral levels, in order to

generate maximum profit for itself. Defendants’ efforts were essential to the success or failure of

the enterprise.

66. Investors understood that, on a monthly basis, the interest rate for their Gemini

Earn investments would be revised by Genesis, reflecting Genesis’ ongoing managerial efforts to

pay among “the highest rates in the market.”

67. Defendants’ statements and actions, and the economic reality of the Gemini Earn

program, have led reasonable investors to expect Genesis to undertake significant and essential

technical, managerial, and entrepreneurial efforts on their behalf, and investors in the Gemini

Earn program reasonably expected to profit from those efforts.

III. Defendants Have Failed to Register their Offer and Sale of Securities Through
Gemini Earn with the Commission

68. Defendants offered and sold securities through the Gemini Earn program.

69. Defendants have used interstate commerce to offer and sell securities through

Gemini Earn by, among other things, engaging in general solicitation through their websites and

other promotional materials, including social media.

70. Defendants have never had a registration statement filed or in effect with the SEC

for their offers and sales of securities through the Gemini Earn program.

71. Defendants’ public disclosures contained selective or no information about

Genesis’ financial history, audited financial statements, management discussion and analysis of

financial condition and results of operations, and ability to generate profits. Gemini Earn

investors also had limited or inadequate information about Genesis’ operations, financial

condition, liquidity, or other factors relevant in considering whether to invest in the Gemini Earn

program. Investors also lacked full and detailed information regarding how Genesis deploys their

crypto assets, including its exposure to volatility in crypto asset markets, the financial condition

of Genesis’ counterparties and the amount of collateral Genesis obtained, if any, as part of its

loans to Institutional Borrowers. In short, Gemini Earn investors lacked information that issuers

provide under the Securities Act when they solicit public investment.

CLAIM FOR RELIEF
Violations of Section 5(a) and 5(c) of the Securities Act

[15 U.S.C. §§ 77e(a) and 77e(c)]

72. The SEC realleges and incorporates by reference paragraphs 1 through 71 above.

73. By virtue of the foregoing, without a registration statement in effect as to that

security, Defendants, directly and indirectly, (a) made use of the means and instruments of

transportation or communications in interstate commerce or of the mails to sell securities through

the use or medium of any prospectus or otherwise; (b) carried or caused to be carried through the

mails or in interstate commerce, by any means or instruments of transportation, any such security

for the purpose of sale or for delivery after sale; and (c) made use of the means and instruments

of transportation or communication in interstate commerce or of the mails to offer to sell through

the use or medium of a prospectus or otherwise, securities as to which no registration statement

had been filed.

74. By engaging in the conduct described above, each Defendant violated, and unless

restrained and enjoined will continue to violate, Sections 5(a) and 5(c) of the Securities Act [15

U.S.C. §§ 77e(a) and 77e(c)].

PRAYER FOR RELIEF

WHEREFORE, the Commission respectfully requests that the Court enter a Final

Judgment:

Permanently enjoining Defendants, and each of their respective agents, servants,

employees, attorneys and other persons in active concert or participation with any of them, from

violating, directly or indirectly, Sections 5(a) and 5(c) of the Securities Act [15 U.S.C. § 77e(a)

and 77e(c)];

II.

Ordering Defendants to disgorge all ill-gotten gains obtained within the statute of

limitations, with prejudgment interest thereon, pursuant to Sections 21(d)(3), (d)(5), and (d)(7) of

the Exchange Act [15 U.S.C. § 78u(d)(3), (5), (7)];

III.

Ordering Defendants to pay civil penalties pursuant to Section 20(d) of the Securities Act

[15 U.S.C. § 77t(d)]; and

IV.

Granting any other and further relief this Court may deem just and proper for the benefit of

investors.

JURY DEMAND

The Commission demands a trial by jury.

Dated: January 12, 2023 /s/ Edward J. Reilly
Edward J. Reilly*
Jonathan Austin (SDNY Bar No. JA-2073)
Ashley Sprague
Attorneys for Plaintiff
SECURITIES AND EXCHANGE
COMMISSION

100 F Street NE
Washington, DC 20549

(202) 551-6791 (Reilly)
Email: [email protected]
*Pending admission pro hac vice

Of Counsel
Stacy Bogert
Deborah A. Tarasevich
James P. Connor

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