Gemini and Genesis Seek Dismissal of SEC Lawsuit Over Unregistered Securities in Earn Program
In a recent court filing, bankrupt crypto lender Genesis Global Capital and exchange platform Gemini have requested the dismissal of a lawsuit filed by the U.S. Securities and Exchange Commission (SEC). The lawsuit claims that the two entities sold unregistered securities through Gemini’s Earn program. The court documents, submitted on Friday, shed light on the ongoing legal battle between the parties involved.
The SEC filed the lawsuit in January with a New York court, focusing on Gemini’s yield-bearing product called Earn. According to the regulator, the unregistered offering allowed the two entities to “raise billions of dollars’ worth of crypto assets from hundreds of thousands of investors.” The SEC also stated that Genesis, which is owned by the Digital Currency Group (DCG), exercised discretion in utilizing investors’ crypto assets to generate revenue and pay interest to Gemini Earn investors.
Gemini countered the SEC’s claims in its filings, clarifying that the Earn program did not involve any lending or borrowing by the platform itself and that lenders could not transfer or assign their assets without the consent of all parties involved. The court documents further argued that the SEC’s treatment of the tri-party Master Digital Asset Loan Agreement (MDALA) contract as an unregistered security was unfounded and lacked legal and factual basis.
SEC Faces Hurdles as MDALA Lawsuit Lacks Concrete Evidence
As per the motion to dismiss, the SEC failed to sufficiently establish that the Master Digital Asset Loan Agreement (MDALA) constituted a security. The document pointed out that the SEC did not provide concrete evidence of the sale of MDALA to any party or an offer to sell it. Gemini and Genesis contend that the SEC’s allegations lack the necessary factual support to warrant legal action.
The SEC’s original complaint revealed that Genesis held approximately $900 million in assets belonging to around 340,000 Gemini Earn investors. Shortly before filing for bankruptcy protection in the U.S., Genesis froze withdrawals from the platform in November. SEC Chair Gary Gensler previously stated,
“We allege that Genesis and Gemini offered unregistered securities to the public, bypassing disclosure requirements designed to protect investors.”
However, Gemini co-founder Tyler Winklevoss dismissed the lawsuit. The court’s decision regarding the dismissal of the SEC’s lawsuit against Gemini and Genesis remains pending as the legal battle continues.
Did you like the news you just read? Please leave a feedback to help us serve you better
Disclaimer: Blockmanity is a news portal and does not provide any financial advice. Blockmanity's role is to inform the cryptocurrency and blockchain community about what's going on in this space. Please do your own due diligence before making any investment. Blockmanity won't be responsible for any loss of funds.