In 2022 and 2023, many cryptocurrency firms went under as a result of the economic downturn and the fact that they were operating in a legal grey area. But one such firm, Genesis, known for their crypto lending platform, has recently settled with the SEC and the outcome isn’t good.
So, what does this mean for customers? Read on to learn all about the Genesis settlement with the SEC and what happens next.
What is Genesis?
Genesis was a cryptocurrency company behind the crypto exchange Genesis, most well-known for the fact that it offered cryptocurrency lending services to customers. Similar to fiat currency lending, Gemini Earn, allowed investors to place collateral in a smart contract and, in exchange, they would lend them a different cryptocurrency. Gemini Earn was operated in conjunction with Gemini Exchange. However, the parent company of Gemini Exchange is not Genesis.
Gemini Earn was a unique platform in that it also allowed investors to back loans using their program, and those taking out a loan would pay the backers a flat 8% in interest—something almost unheard of in fiat lending.
Of course, like many platforms in the cryptocurrency space, it sounded too good to be true…and it was.
What Happened to Genesis?
Genesis was an unfortunate victim of the economic downturn in 2022, and it was further harmed when FTX and Three Arrows Capital went under. While they originally seemed like they would be able to keep their head afloat, the lending division suffered losses it couldn’t come back from, and it eventually closed its doors in November 2023.
In January 2024, Genesis filed for bankruptcy protection for its lending division only, which had gone under in 2022, and, at the time, it seemed like the exchange would continue operations as normal.
Unfortunately, the final bad news about the lending program angered investors, many of whom considered the lending program the only benefit of using Genesis tools over another platform. Unfortunately for Genesis, investors sued, causing losses of over $1 billion USD, something the platform didn’t have on hand.
Many investors didn’t realize that Genesis was a highly risky investment from the start; in fact, they barely had enough money on hand to cover the cost of day-to-day operations, according to the SEC, something the platform misrepresented to investors.
The Genesis and SEC Settlement
Genesis has reached a settlement with the SEC, which will go before a judge on Valentine's Day (February 14th, 2024). It is assumed that the judge will approve the settlement.
The settlement includes liquidation plans for the platform as well as stipulations that prohibit it from resuming operations in certain US states (namely, New York). The settlement also indicates that Genesis will pay $21 million, repay customers, and surrender their BitLicense, effectively ending its business permanently in the US.
What Do Genesis Customers Need to Do?
While Genesis originally said they would maintain their international exchanges and just close their US-based ones, this is no longer the case. Genesis Exchange is closing for good, and all customers in the US will need to close their accounts. The lending program, Gemini Earn, has already stopped in all locations and will not reopen.
Currently, most accounts have been locked, meaning customers cannot withdraw. This will change, however, as Genesis moves to satisfy the restitution outlined in their settlement. But for now, there is nothing you can do but sit back and wait.
We aren’t exactly sure when customers will be able to withdraw or will be sent the money they are owed. We recommend monitoring your email for updates, as well as logging into your account to see if there are any notices posted, providing you with an estimated timeline for fund withdrawal.
We also expect that once the judge approves the settlement, more information will be released as to what customers can expect.
Will Genesis Reopen?
The settlement prevents Genesis from reopening in the United States. While there still is a possibility that Genesis could reopen abroad, at this point, it is unlikely they will do so, as they have to pay so much in restitution. We advise any customers not to bank on them reopening and instead make plans to withdraw from their accounts when they are directed to do so.
To be clear, Genesis is the part of the company that will likely not reopen. However, Gemini Exchange is open and will continue to do business on their exchange as they have a different parent company. Any parts of the business, such as the earning program, run by Genesis, will not be reopening.
If you are a Gemini customer, there is no reason to panic, but know that they, too, have run into regulatory issues with the SEC and may have a rocky road ahead. More on this in another article.
Are There Other Crypto Lending Firms Which Can Be Used?
The cryptocurrency space has suffered blow after blow in recent years, but that doesn’t mean you don’t have the option to invest in cryptocurrency lending services. Below is a list of some of the cryptocurrency lending services that are still available.
Remember to vet any cryptocurrency lending service before you use it, as this is just a list of the options available, and we have not vetted any of these sites.
Overall, it is always scary when another cryptocurrency company announces that it is closing its doors, and it seems like there is a new announcement every day. No matter what lawmakers do, however, cryptocurrency is here to stay. So, while you should always be cautious about the platforms you use to hold and trade your crypto, none of this news will cause Bitcoin or Ethereum to go away.
We expect that many changes are coming to the cryptocurrency industry as a result of these recent issues, and we are excited to watch the industry overcome the recently presented problems. This is a developing story, and we will make further announcements in the future.
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