US regulators have accused Gemini and Genesis of breaking the law by selling crypto assets to hundreds of thousands of investors.
People say the companies broke the law when they offered and sold the products through their joint program, Gemini Earn, which started in 2021.
The Securities and Exchange Commission is in charge of the case (SEC).
Tyler and Cameron Winklevoss, who is famous for suing Facebook, started Gemini.
Tyler Winklevoss called the complaint “disappointing” and said his company was ready to defend itself.
Genesis is owned by Digital Currency Group, which hasn’t said anything yet about the charges.
SEC brought charges against the Winklevoss brothers
Gary Gensler, in charge of the SEC, said, “Today’s charges build on previous actions to make it clear to the market and investors that crypto lending platforms need to follow our time-tested securities laws.”
Since last Sunday, the Winklevoss brothers and Barry Silbert, CEO of Digital Currency Group, the company that owns Genesis, have been fighting in public.
It was about Gemini Earn, advertised as a way for investors to make up to 7.4% interest on their cryptocurrency holdings.
When FTX filed for bankruptcy last November, Genesis stopped customer withdrawals, saying it didn’t have enough cash because the market was so unstable.
This made it hard for 340,000 Gemini Earn customers to get their cryptocurrency assets.
Cameron Winklevoss says that as a result, Digital Currency Group owes $900 million (£737 million) to clients of his company, Gemini and that Mr. Silbert’s group “cheated” his clients.
A representative for the Digital Currency Group said that the accusations were “malicious, false, and defamatory attacks” and a “desperate and unhelpful publicity stunt.”
The SEC is in charge of regulating the US financial markets and can sue companies it thinks have broken the law, such as the ones owned by the Winklevoss.
Through a complaint filed in the District Court for the Southern District of New York, it wants both companies to pay “ill-gotten gains” and civil penalties.
This week, Mr. Gensler said crypto is like the “Wild West.”
After FTX and Alameda Research went bankrupt and caused a big stir, the US government is cracking down on the sector. This is why the new charges are being brought.
Their founder, Sam Bankman-Fried, is being accused of fraud because he took money millions of customers put on his FTX platform and gave it to a hedge fund without their permission.
Mr. Bankman-Fried denies the charges.
After a hard year in 2022, is crypto dead?
Bitcoin would be a tough boxer who doesn’t give up.
But in the last few weeks, the collapse of industry giant FTX and the arrest of its founder Sam Bankman-Fried in the Caribbean have both hit it hard.
Bitcoin is used to getting hit, but after its worst year ever, this fighter against the establishment was already on the ropes.
If Bitcoin were a boxer, it would be on its back on the mat looking at the stars.
Does it still work even though it’s down?
Bitcoin’s rise from being poor to being rich
Bitcoin is a great story about an underdog, just like Rocky.
When it began in 2009 on the rough, lawless streets of internet forums, it was just a featherweight.
Yes, there was a glimmer of hope, but it was only believed in by a small group of loud fans, and it was worth almost nothing at first, just a few pennies.
But as time went on, more and more people started to back Bitcoin, which helped it grow and fight against the establishment.
Bitcoin’s value went up to thousands of dollars, and some places started to accept and use it. It began to be used on niche websites or in hip cafes.
Bitcoin slowly gained popularity despite all odds, like a prize fighter.
Before Bitcoin became famous and made much money in 2021, thousands of copycats like Ethereum, Dogecoin, and Litecoin popped up.
Read Also: Cryptocurrency: UK to plan for digital pound
People were throwing money at it, and one coin cost almost $70,000 (£57,200) more than all the other cryptocurrencies combined.
Even powerful people were falling over themselves to invest in Bitcoin and cryptocurrency projects.
“A point of change”
But in November of that year, Bitcoin started to lose value, and since then, it has been going down. Because of all the hits and scandals it has had, its value, trust, and excitement are at their lowest point in years.
Last month’s collapse of FTX was the most shocking thing to happen to crypto in years. It was the world’s second-largest exchange. Still, it helped millions of people get into cryptocurrency.
It was thought to be one of the safest platforms, but its finances became unstable, and it went out of business in a few days. Sam Bankman-Fried, the founder of FTX, is in custody after the US accused him of building “a house of cards on a foundation of lies” while telling investors it was one of the safest buildings in crypto.