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SEC charges Gemini, Genesis over Earn program; Winklevoss responds

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SEC charges Gemini, Genesis over Earn program; Winklevoss responds

SEC charges Gemini, Genesis over Earn program; Winklevoss responds Mike Dalton · 5 hours ago · 2 min read

The now-defunct service allegedly constituted an unregistered securities offering.

2 min read

Updated: January 12, 2023 at 11:54 pm

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Cover art/illustration via CryptoSlate

The U.S. Securities and Exchange Commission has charged Genesis and Gemini over their now-defunct Gemini Earn program, according to a Jan. 12 announcement.

SEC chair Gary Gensler said:

We allege that Genesis and Gemini offered unregistered securities to the public, bypassing disclosure requirements designed to protect investors. Today’s charges build on previous actions to make clear … that crypto lending platforms and other intermediaries need to comply with our time-tested securities laws.

The SEC said that the Earn program constituted both an unregistered offer and sale of securities. The regulator further alleged that Genesis and Gemini brought in billions of dollars worth of cryptocurrency from hundreds of thousands of users.

Genesis and Gemini entered an agreement in December 2020 that led to the launch of Gemini Earn in February 2021. The service allowed Gemini users, through a tri-party agreement, to lend assets to Genesis in exchange for interest on those deposits.

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Genesis then forced a halt on Earn withdrawals in November 2022, citing a lack of liquidity resulting from market conditions at the time of FTX’s collapse. The SEC said that Genesis Earn held $900 million worth of crypto assets belonging to 340,000 Gemini Earn users at the time that withdrawals were paused. That issue has attracted plenty of controversy in recent months, and it made up part of the SEC’s complaint today.

However, the SEC additionally drew attention to questionable practices carried out by Gemini while the service was operational. The regulator said that Gemini collected an agent fee as high as 4.29%. It also alleged that Gemini pooled investors’ Earn funds with other funds and invested those funds at its discretion, as the Earn agreement did not clearly set state how investor assets could be used.

The SEC’s filed complaint also suggests that the Gemini Earn agreements were not registered with the SEC as required by federal securities laws. It additionally alleges that Gemini and Genesis made “selective and inadequate disclosures” and says that the two firms promoted Gemini Earn to the public as an investment.

The SEC seeks to enjoin the two companies from further violating specific securities regulations. It also aims to have the two companies disgorge or surrender their ill-gotten gains and pay interest and penalties on those gains. Today’s filing does not indicate exactly how much Genesis and Gemini might owe to the SEC. Nor does it indicate precisely which services — if any — the two firms might be prevented from offering.

Earn users have now been unable to withdraw their funds for two months, and the program was officially and permanently suspended on Tuesday. It is unclear whether the SEC’s actions will help users regain the funds in their accounts.

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Tyler Winklevoss responds

Tyler Winklevoss responded on Twitter, saying the behavior of the SEC is seen as counterproductive, and they never raised the prospect of any enforcement action until after withdrawals were paused. He also mentioned

“Despite these ongoing conversations, the SEC chose to announce their lawsuit to the press before notifying us. Super lame. It’s unfortunate that they’re optimizing for political points instead of helping us advance the cause of 340,000 Earn users and other creditors.”

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DeFi

Four RWA lending protocols rank among top 10 lending apps with largest collected interest 

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Four RWA lending protocols rank among top 10 lending apps with largest collected interest 

Four RWA lending protocols rank among top 10 lending apps with largest collected interest  Zeynep Geylan · 1 hour ago · 2 min read

TrueFi, Maple Finance, Goldfinch, and Centrifuge collected the third, fourth, seventh, and tenth largest sum in interest, respectively.

2 min read

Updated: January 25, 2023 at 2:24 pm

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Cover art/illustration via CryptoSlate

Four Real-World Asset (RWA) lending protocols ranked among the top ten Defi lending protocols that collect the largest sum of 180-day cumulative interest fees paid by users, according to crypto influencer Defilgnas’ recent analysis.

TrueFi (TRU), Maple Finance, Goldfinch (GFI), and Centrifuge (CFG) are ranked third, fourth, seventh, and tenth, respectively, according to @Defilgnas.

Top 10 Defi lending protocols by cumulative daily fees

As of Jan. 24, TrueFi owns the third-largest incremental interest fees collected in the past 180 days with $12.1 million. Maple Finance follows TrueFi as a close fourth with $11.7 million. Goldfinch and Centrifuge also make it into the top ten with $5.6 million and $3.2 million, respectively.

In addition, MakerDAO, which ranks sixth on the list with $6.6 million, is also generating 57% of its total revenue from RWAs.

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Active loans worth $326M

The cumulative value of the active loans of these four RWA protocols also adds up to $326 million, according to data.

Active loans value by Protocol

The chart includes Clearpool, Ribbon Lend, and Credit, in addition to TrueFi, Maple Finance, Goldfinch, and Centrifuge. Altogether, the total value of active loans given by these nine protocols sits at $361 million.

TrueFi, Maple Finance, Goldfinch, and Centrifuge account for 90.3% of this sum, with a collective amount of $326 million.

Maple Finance contributes the most considerable bulk to this with $127 million worth of active loans. Goldfinch, Centrifuge, and TrueFi also add $103 million, $77 million, and $19 million, respectively.

The chart above doesn’t include Maker Dao’s active RWA loans, which stand at around $620 million.

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Bankruptcy

Celsius may restructure and issue new token

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Celsius may restructure and issue new token

Celsius may restructure and issue new token Mike Dalton · 26 seconds ago · 1 min read

The company’s plans must still be approved by courts and creditors.

1 min read

Updated: January 25, 2023 at 12:20 am

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Cover art/illustration via CryptoSlate

Bankrupt crypto lender Celsius could soon restructure and issue a cryptocurrency token to compensate users, according to a report from Bloomberg on Jan. 24.

During a court hearing, Celsius attorney Ross M. Kwasteniet said the company could be reorganized into a publicly-traded company with proper licensing. That approach could serve as an alternative to selling the company’s crypto assets — and could be more profitable for creditors given the currently poor crypto market conditions.

Celsius is also working to issue a new cryptocurrency token to compensate the company’s creditors, Kwasteniet said.

Certain creditors are reportedly asking Celsius to follow the lead of Bitfinex, which issued the UNUS SED LEO token in 2019 after losing access to a portion of its funds. Bitfinex committed to a buyback of the token to compensate users.

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CoinFLEX, which went bankrupt shortly after Celsius’ own collapse, similarly issued a recovery token (rvUSD) last summer. That token was tied to the value of the U.S. dollar and offered 20% annual returns to users willing to hold the asset.

Celsius would need approval from a federal judge to issue a token. Furthermore, any restructuring plan would face a creditor vote.

More detailed reports from CoinDesk suggest that Celsius’ would name its new token the Asset Share Token (AST). The token would be issued to high-value creditors. Those creditors could then sell the tokens for immediate profit or hold the tokens to receive interest. Celsius’ remaining smaller investors, who make up about two-thirds of its base, would receive partial compensation in standard cryptocurrencies instead.

Celsius’ original token, CEL, is still in circulation but cannot be used as a reward token as intended because the company has halted its services. CEL’s value is down 77% over the past year. Bitcoin, by contrast, is down just 37% over one year.

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Maple Finance records a loss of $7M at end of 2022

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Maple Finance records a loss of $7M at end of 2022

Maple Finance records a loss of $7M at end of 2022 Christian Nwobodo · 6 hours ago · 1 min read

Maple Finance Q4 report shows it originated about $87 million across 23 new loans, which is down by 67% from its previous record of $262 million.

1 min read

Updated: January 20, 2023 at 4:31 pm

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Cover art/illustration via CryptoSlate

Institutional crypto lending protocol Maple Finance has reported a net loss of about $7 million at the end of the fourth quarter of 2022 as it moves to close its lending pools on Solana.

Maple Finance was launched in May 2021 as a decentralized credit market for institutional borrowers and lenders. Since its inception, the lending protocol has offered over $1.9 billion in corporate loans.

However, the ripple effect of the prolonged bear market and FTX collapse has affected borrowers’ appetite for its loan offerings.

In Maple’s Q4 2022 Treasury report, the lending protocol disclosed that it originated about $87 million across 23 new loans, which is down by 67% compared to its record of $262 million in the third quarter. As a result, Maple closed the fourth quarter with total active liquidity of $58 million, as against $326 million when the quarter began.

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Over the reporting period, Maple recorded a revenue of about $310,092, while its expenses stood at roughly $3.57 million.

Furthermore, Maple incurred a loss of $151,933 from its M11 Credit Pool due to Orthogonal Trading’s insolvency. As reported on Dec. 5, Maple severed business ties with Orthogonal Trading as the lending delegate was reportedly insolvent, leading to an expected loss of roughly $3 million

The Q4 report added that since Maple’s inception, its revenue-to-date stood at  $5 million, while its expenses totaled $12.1 million. Consequently, the crypto lender recorded a net loss of approximately $7 million by the end of 2022.

In efforts to cut operating costs, Maple said it will suspend all lending pools on Solana and reduce its quarterly expenses from about $2.4 million to $1.2 million.

With approximately $6.1 million in its Treasury, Maple said it will work to increase its runway up to 16 months in a zero-revenue environment.

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