Yet another nail in the coffin for cryptocurrency investors.
In the wake of November 2022’s collapse of the FTX, other crypto companies are getting stuck in its vortex. The next big firms dragged down by the debacle are Genesis, and the Winklevoss twins’ crypto exchange, Gemini.
According to the Wall Street Journal, Genesis had an outstanding loan amounting to $175 million that it could not recover from Alameda Research, the sister trading firm to FTX. The failure to recover the funds led to Genesis halting withdrawals for consumers.
With FTX’s contagion spreading, the SEC has crypto firms in it’s crosshairs.
After discovering both Genesis and Gemini’s $900 million crypto lending program, the SEC filed a lawsuit against both companies.
The program was simple with consumers permitting the exchange to loan their hard-earned crypto coins in Gemini’s custody to their crypto lender, Genesis. This is similar to how savings accounts work with traditional banks; however, investors expected earn up to 8% interest in their portfolios when enrolled in the program.
The SEC is seeking fines and the return of any profits made from the lending program.
Tyler Winklevoss, the co-founder of Gemini, responded to the SEC, tweeting, “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.”
The SEC is also in a years-long court case against RippleLabs for its alleged issuance of their native crypto coin, XRP, and for failing to register it as a security. All this is in addition to the charges filed against Samuel Bankman-Fried for allegedly defrauding FTX investors.
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