US regulators have accused cryptocurrency businesses Gemini and Genesis of selling crypto assets to thousands of customers illegally.
By offering and selling the products through their joint program, Gemini Earn, which debuted in 2021, the companies are accused of breaching the law.
The lawsuit is being handled by the Securities and Exchange Commission (SEC).
Tyler and Cameron Winklevoss, twins famous for their legal battle with Facebook, co-founded Gemini.
The accusation, according to Tyler, is “disappointing,” and his business is eager to defend itself.
Genesis, a subsidiary of the crypto juggernaut Digital Currency Group, has not yet responded to the accusations.
“Today’s charges build on prior actions to make it plain to the market and the investing public that crypto lending platforms and other intermediaries need to abide by our tried-and-true securities rules,” said Gary Gensler, chairman of the SEC.
“This best safeguards investors. It encourages market trust. It is required. That is the law.
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The Winklevoss brothers and Barry Silbert, the CEO of Digital Currency Group, the parent company of Genesis, have been engaged in a public spat for the past week.
It had to do with Gemini Earn, which offered investors the chance to earn up to 7.4% interest on their crypto assets.
Genesis stopped accepting customer withdrawals when FTX declared bankruptcy in November, claiming it lacked enough liquid assets due to the erratic nature of the market.
340,000 Gemini Earn users were adversely affected by this since they were unable to withdraw their cryptocurrency assets.
Cameron Winklevoss alleges Mr. Silbert’s business “defrauded” his clients and that as a result, Digital Currency Group owes $900 million (£737 million) to clients of his company Gemini.
A representative for Digital Currency Group denied the allegations, calling them “malicious, false, and defamatory assaults” and a “desperate and unproductive PR attempt.”
The Wild West
The SEC oversees the US financial markets and has the authority to bring civil lawsuits against businesses it feels have broken the law.
It aims to impose civil fines on both businesses through its complaint, which was submitted to the US District Court for the Southern District of New York, and to have them make up for “ill-gotten gains.”
Mr. Gensler compared cryptocurrency to the “Wild West” earlier this week.
These most recent accusations are being made as US authorities crack down on the industry in response to the commotion that FTX and Alameda Research’s bankruptcies produced.
Their creator, Sam Bankman-Fried, is charged with fraud after allegedly diverting money that millions of users had invested on his FTX platform and sending it to the hedge fund Alameda without their consent.
Bankman-Fried disputes the accusations.