SEC Issues Advisory vs Gemini Exchange for Selling Unregistered Securities in the Philippines

• The Philippine SEC has warned Gemini Trust for offering unregistered Gemini Derivatives, violating the country’s Securities Regulation Code (SRC).
• Gemini Trust’s recent expansion into 30 countries, including the Philippines, triggered additional violation allegations regarding public solicitation under the SRC.
• Individuals representing Gemini Trust could face prosecution or penalties up to ₱5 million or 21 years imprisonment as the company continues to navigate global regulatory complexities.

UPDATE: Gemini, on its website, has removed the Philippines as one of the countries where they offer derivatives, but a record of which can be accessed here.

The Securities and Exchange Commission (SEC) has issued a warning against Gemini Trust Company, LLC, which is offering its product, Gemini Derivatives, without the necessary registration and licenses in the Philippines to do so.

Violation Securities Regulation Code

In a press release, the SEC said it is illegal in the Philippines to sell, offer, or distribute securities without prior registration with the Commission. Gemini was offering derivatives, which are considered a form of securities according to the country’s Securities Regulation Code (SRC), and are therefore under the purview of the SEC.

Gemini Trust Company, LLC, the SEC stated, is in violation of Section 8.1 of the SRC, which states that securities shall not be sold or offered for sale or distribution within the Philippines without a registration statement duly filed with and approved by the Commission (emphasis provided by SEC in the press release):

GEMINI TRUST COMPANY, LLC’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 SRC.

Gemini literally just announced its derivatives offering outside the U.S this month. In an article on BitPinas, the offering was launched in 30 countries, which also included Singapore, Argentina, and India.

In the same BitPinas article, writer Shiela Bertillo noted on whether Gemini can actually offer derivatives in the Philippines:

In the Philippines, any company that wishes to offer derivatives is generally required to obtain a license from the SEC. It is prescribed under the Securities Regulation Code (SRC) of 2000, which states that any entity that desires to offer or sell securities, including derivatives, in the country must register with the Commission and comply with all applicable regulations and licensing requirements. 

Public Solicitation Violation Claims

The SEC also took note of the fact that Gemini has announced its offering of derivatives in the Philippines through the media. The Commission viewed this as a Public Offering, another violation. The implementing rules and regulations of the SRC stipulate that any of the following forms can constitute a Public Offering and are therefore viewed as Public Solicitation (emphasis provided by SEC in the press release):

3.1.17.3. Advertisement or announcement on radio, television, telephone, electronic communications, information communication technology or any other forms of communication; or

3.1.17.4. Distribution and/or making available flyers, brochures or any offering material in a public or commercial place or to prospective purchasers through the postal system, information communication technology and other means of information distribution.

Potential Legal Repercussions for Gemini Trust Representatives

SEC also stated that those who act on behalf of Gemini.com and/or GEMINI TRUST COMPANY, LLC in selling or convincing others to invest may be held criminally prosecuted or penalized, which could be anything between a maximum of ₱5 million or 21 years of imprisonment.

Gemini’s efforts to expand in more countries was influenced by ongoing complexities in the US, its owners the Winklevoss twins stated in an interview with Fortune Magazine.

“We’re not leaning out of the U.S.; we’re just leaning into being a global company. If lawmakers could come together and build a clear framework for crypto companies, it would be a huge boon for the U.S. and a huge boon for consumers, innovators, and investors,” its owner Tyler Winklevoss was quoted.

The exchange was sued by the US Commodity Futures Trading Commission (CFTC) in 2022 for allegedly providing false information to the regulators after attempting to secure approval for its Bitcoin Futures product in 2017.

Gemini was also sued by the US SEC. The local regulator quoted the US SEC Chairman in its press release. “Today’s charges build on previous actions to make clear to the marketplace and the investing public that crypto lending platforms and other intermediaries need to comply with our time-tested securities laws. Doing so best protect investors. It promotes trust in markets. It’s not optional. It’s the law.”

This article is published on BitPinas: SEC Issues Advisory vs Gemini Exchange for Selling Unregistered Securities in the Philippines

Disclaimer: BitPinas articles and its external content are not financial advice. The team serves to deliver independent, unbiased news to provide information for Philippine-crypto and beyond.