Philippines SEC Targets Gemini Over Unlicensed Derivatives Trade

The cryptocurrency exchange Gemini is in hot water with regulators in the Philippines and faces the risk of severe penalties, including criminal prosecution. As if the founders did not already have enough trouble with US regulators’ charges of unregistered securities sales and excessive agent fees.

Gemini, an ambitious venture founded by Cameron and Tyler Winklevoss, is the target of charges from the Philippines’ equivalent of the US Securities and Exchange Commission (SEC), Bloomberg reported Monday. The Filipino SEC has even quoted US regulators in making its case against the exchange.

The Philippines SEC Takes Aim

Officials of the Philippines SEC allege that Gemini is operating without proper authorization. According to the charges, Gemini has been offering and marketing securities through its Philippines derivatives exchange without bothering to register.

Gemini launched its derivatives-trading product only on May 1. Under Filipino law, derivatives are securities.

The SEC emphasizes that the exchange lacks the necessary license to solicit investments. Not to mention, to accept funds from the public or issue securities. Consequently, the commission warns the public to stop investing with Gemini and to cease all current investments on the platform.

Violating securities regulations in the Philippines can lead to severe penalties, including criminal prosecution. Conviction comes with a maximum prison sentence of 21 years or a fine of up to five million pesos ($89,562).

The SEC’s action against Gemini is not an isolated incident. Regulators in other countries have taken similar steps in response to the exchange’s activities in the crypto industry.

For instance, earlier this year, the US SEC filed a complaint, alleging that the company’s Gemini Earn program involved the offer and sale of unregistered securities. Genesis, which partnered with Gemini but then faced liquidity problems, would not allow Gemini Earn investors to withdraw all their funds. Totaling some $900 million in assets from 340,000 investors.

Philippines SEC Quotes US Counterparts

Interestingly, the Philippines SEC has quoted Gary Gensler, the chair of its American counterpart, in its statement about the enforcement action. The Gensler quote—part of his original statement on the Gemini Earn program—emphasized the need for crypto platforms to adhere to established securities laws. And the fact that compliance is not optional but a legal requirement that protects investors and builds trust.

The situation in the Philippines adds to significant legal woes. In 2022, the US Commodity Futures Trading Commission sued Gemini. It alleged that Gemini provided false information to regulators during discussions related to its Bitcoin futures approval.

The Philippines SEC has called upon anyone with information about investment solicitation activities by Gemini or its website, gemini.com, to report such activities to the Enforcement and Investor Protection Department.

Expansion into foreign markets seems to have been on the table for Gemini for some time. Last month, Gemini announced it would be the latest crypto company to leave the US.

A number of companies in the industry are taking part in an exodus. It is a response to a regulatory environment seen as increasingly hostile and uncertain.

BeInCrypto has reached out to Gemini and the Philippines SEC for comment. As of press time, no response has been received.