Gemini issued warning in Philippines over crypto derivatives exchange
A DERIVATIVES exchange launched by crypto trading platform Gemini Trust last month has allegedly been operating without authorisation in one of its jurisdictions, the Philippines’ Securities and Exchange Commission (SEC) said in a warning to investors.
Gemini launched the exchange and has been offering and marketing derivatives products, which are considered to be securities under local law, in the country without having first registered with the regulator, according to a notice published on the SEC’s website on May 18.
New York-based Gemini does not have “the necessary licence and/or authority to solicit, accept or take investments/placements from the public nor to issue securities”, the agency said, advising the public to both not invest and halt all current investments with the platform. The terms and conditions for the platform, known as Gemini Foundation, state it is operating under a subsidiary called Gemini Artemis. A Gemini spokesperson declined to comment.
“Gemini Trust Company’s lack of prior registration with the Commission makes their activities of offering and/or selling securities in the form of derivatives illegal in violation of the provisions of the securities regulation code (SRC),” the SEC said, referring to its local SRC.
The penalties for falling foul of such rules include criminal prosecution and a maximum 21-year jail sentence, or a fine of 5 million Filipino pesos (S$121,040).
The Philippines’ action came shortly before Malaysia’s securities regulator reprimanded another crypto exchange, Huobi Global, for operating “illegally” in the South-east Asian nation. Huobi was ordered to halt all activities and disable its website and mobile application on Monday (May 22).
Gemini Foundation was announced in late April and launched fully as a non-US derivatives trading venue this month, with the Philippines listed as an available destination among several other countries in the Asia Pacific, European, African and American regions. It offers perpetual futures contracts for Bitcoin and Ether denominated in Gemini’s own stablecoin GUSD, a crypto asset tied one-to-one with the value of the US dollar. Crypto derivative exchanges aren’t authorised in the US.
Gemini faced a similar complaint from the US Securities and Exchange Commission earlier this year, which alleged that the exchange’s Earn programme – a platform where users can earn interest on locked-up digital asset holdings – constituted the offer and sale of securities without prior permission. Tyler Winklevoss, one of Gemini’s billionaire co-founders alongside his brother Cameron, described the SEC’s action as a “manufactured parking ticket”, adding that the SEC had publicised its complaint before notifying Gemini.
The exchange is embroiled separately in an ongoing bankruptcy spat over failed crypto lender Genesis Global Capital, to which Gemini is a major creditor. More than 200,000 users of Gemini’s Earn programme have funds locked up in Genesis’s estate due to a service arrangement between the two companies, for which Gemini said on Friday it would file a master claim of around US$1.1 billion in assets. BLOOMBERG
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