Feuding crypto giants Genesis and Gemini have been sued by the SEC for 'unregistered offer and sale of securities'

• Crypto giants Genesis and Gemini have been sued by the SEC for the offer and sale of unregistered securities.
• Authorities claim the firms illegally raised billions of dollars worth of crypto through the Gemini Earn program.

The Securities and Exchange Commission sued crypto giant Genesis's lending arm Genesis Global Capital and digital currency exchange Gemini Thursday for the unregistered offer and sale of securities to customers through an interest-bearing product.

It said the firms raised billions of dollars worth of crypto assets through the unregistered Gemini Earn program.

"We allege that Genesis and Gemini offered unregistered securities to the public, bypassing disclosure requirements designed to protect investors," SEC chairman Gary Gensler said in a statement.

"Today's charges build on previous actions to make clear to the marketplace and the investing public that crypto lending platforms and other intermediaries need to comply with our time-tested securities laws. Doing so best protects investors. It promotes trust in markets. It's not optional. It's the law," he added.

Gemini, spearheaded by the Winklevoss twins, launched its Earn program in February 2021 that let users lend their crypto to institutional borrowers in exchange for interest on the assets. It partnered with Genesis for the program.

But in the wake of the implosion of crypto exchange FTX in November, Genesis's lending arm halted customer withdrawals, leaving $900 million of Gemini client money stuck on the platform. The lending business, which is owned by crypto conglomerate Digital Currency Group, experienced a severe liquidity crunch due to its exposure to FTX and a wave of withdrawal requests.

That triggered a public battle between Cameron Winklevoss and DCG CEO Barry Silbert over the $900 million loan, in which the two parties have made open jabs at each other.

Along with the SEC, investors are also suing the Winklevoss twins and their firm over the interest-bearing product, while a group of Gemini investors are accusing the firm of fraud.

Amid the ongoing saga, more details are emerging of the two crypto funds. According to the FT, Genesis reportedly owes creditors $3 billion thanks in part to FTX's collapse.