- Gemini asked that the SEC’s action be dismissed.
- The exchange, founded by brothers Tyler and Cameron Winklevoss, has requested a US court to dismiss an SEC case alleging improper securities sales.
- The SEC filed a complaint against the exchange and Genesis, Digital Currency Group’s crypto lending arm, on January 12.
Gemini, the exchange operated by the Winklevoss brothers Tyler and Cameron, urged a U.S. court on Friday to dismiss a Securities and Exchange Commission complaint alleging it improperly offered unregistered securities in a scheme that promised high-interest rates to hundreds of thousands of investors.
The motion was filed in Manhattan federal court in response to the SEC’s civil case against the exchange and the cryptocurrency lender Genesis Global Capital, a subsidiary of Digital Currency Group, which was filed on Jan. 12.
Gemini’s lawyer, John Baughman, wrote:
“The SEC claims that the contract setting up the Earn program was itself a security. Even if that were right … the SEC would then have to show that the contract was sold. That never happened.”
Earn was made available by Gemini in collaboration with Genesis Global Capital. Users might earn interest on their crypto deposits since the providers re-invested those assets.
According to the exchange’s most recent report, this offer was nothing more than a loan arrangement. However, the corporation highlighted a number of issues, the primary one was that the contracts were not offered on a secondary market. As a consequence, it claims that the loan arrangements it has entered into do not constitute securities. It requested that the court dismiss the suit with prejudice.
Baughman said that Genesis has also filed a motion to dismiss the lawsuit and that Gemini is pleased to join this debate.
The SEC has filed a lawsuit against Gemini Earn, which allowed clients to lend crypto assets such as bitcoin to Genesis in return for an agent fee of up to 4.29%. According to the regulator, the initiative allowed the exchange and Genesis to raise billions of dollars in crypto assets before Genesis suspended withdrawals last November in the aftermath of Sam Bankman-FTX Fried’s cryptocurrency exchange’s failure.
According to the agency, Genesis controlled $900 million in assets from over 340,000 Gemini Earn users. The exchange and Genesis were accused by the regulator of evading investor-protection disclosure obligations.
Earn was compelled to suspend withdrawals in November 2022 by Genesis. Gemini thereafter permanently ceased operations on January 10, 2023.
Genesis’ loan arm also declared bankruptcy on January 19, 2023. This has consistently hampered Gemini’s ability to retrieve payments owing to former Earn customers. Genesis’ parent firm, Gemini, just skipped a $630 million payment, according to Gemini.
Baughman recognized these concerns when he said that Genesis’ bankruptcy was dragging on. He claims that the SEC action will only make it more difficult to compensate Earn consumers.
The SEC’s scrutiny of the crypto company is intensifying. The agency has also targeted Coinbase, the biggest crypto exchange in the United States. A Wells Notice was delivered to Coinbase around two months ago due to its staking program.
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