Cryptocurrency firms Gemini and Genesis have been accused by US regulators of illegally selling crypto assets to hundreds of thousands of investors.
The companies are accused of breaking the law by offering and selling the products through their joint program, Gemini Earn, which started in 2021.
The Securities and Exchange Commission (SEC) is responsible for the case.
Gemini was co-founded by twins Tyler and Cameron Winklevoss – known for their legal battle with Facebook.
Tyler called the complaint “disappointing” and said his company looks forward to defending itself.
Genesis, which is owned by crypto conglomerate Digital Currency Group, has not yet commented on the allegations.
Gary Gensler, Chairman of the SEC, said: “Today’s indictments build on previous actions to make it clear to the market and the investing public that crypto lending platforms and other intermediaries must comply with our well-established securities laws.
“This is the best way to protect investors. It promotes confidence in the markets. It’s not optional. It is the law.”
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A public feud erupted last week between the Winklevoss brothers and Barry Silbert, the chief executive officer of Digital Currency Group, Genesis’ parent company.
It referred to Gemini Earn, which was sold to investors to earn up to 7.4% interest on their cryptocurrency holdings.
When FTX filed for bankruptcy last November, Genesis halted customer withdrawals due to insufficient cash due to market volatility.
This impacted 340,000 customers using Gemini Earn, preventing them from withdrawing their crypto assets.
Cameron Winklevoss claims the Digital Currency Group owed customers of his company Gemini $900m (£737m) as a result and accused Mr Silbert’s group of “cheating” his customers.
A spokesman for Digital Currency Group denied the allegations, saying they were “malicious, false and defamatory attacks” and describing them as a “desperate and unconstructive publicity stunt”.
The SEC regulates the financial markets in the United States and has enforcement powers to bring civil actions against companies that it believes have broken the law.
Her lawsuit, filed in US District Court for the Southern District of New York, seeks civil penalties for both companies and to force them to repay “illegitimate profits”.
Earlier this week, Mr. Gensler described crypto as the “wild west.”
These latest indictments come as US officials crack down on the sector following the uproar caused by the bankruptcies of FTX and Alameda Research.
Its founder, Sam Bankman-Fried, has been accused of fraud after he diverted funds deposited by millions of customers on his FTX platform and sent them to Alameda, a hedge fund, without authorization.
Mr Bankman-Fried denies the allegations.
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