Gemini Trust, a digital currency exchange, and Genesis Global Capital, which is presently insolvent, have filed a joint motion to dismiss a lawsuit brought against them by the Securities and Exchange Commission (SEC).
The SEC alleged that the company’s product, Earn, was an unregistered securities offering. The lawsuit pertains to Gemini Earn, a service that allowed users to loan their digital assets, such as bitcoin, to Genesis, with Gemini receiving a commission of up to 4.29% as an agent fee.
Gemini and Genesis goes for Dismissal
Gemini and Genesis managed to accumulate billions of dollars worth of digital assets through a program approved by the regulator. But in November of last year, Genesis halted withdrawals after the FTX cryptocurrency exchange, owned by Sam Bankman-Fried, collapsed.
A court filing was submitted by Gemini Trust Co in Manhattan federal court as a response to the SEC’s civil lawsuit against the exchange and cryptocurrency lender Genesis Global Capital LLC, which is a subsidiary of Digital Currency Group, on January 12th.
Gemini has responded to the dismissal motion of the lawsuit filed by the SEC, stating that their Earn program contract is not a security. The SEC had claimed that Gemini and Genesis did not comply with mandatory disclosure rules, which were in place to protect investors. However, Gemini has called the lawsuit “ill-conceived.” The program had allowed customers to earn returns on their crypto deposits, enabling both companies to accumulate billions of dollars in crypto assets. Genesis held assets worth around $900 million from 340,000 Gemini Earn clients.
Gemini Requests Dismissal of Lawsuit
Gemini, along with Genesis have both submitted a motion to dismiss the SEC’s lawsuit regarding unregistered securities amidst ongoing restructuring and bankruptcy proceedings. The SEC has remained silent on the matter. Gemini’s request to dismiss the lawsuit is based on the argument that the Earn program contract is not considered a security and therefore, registration with the SEC was not required. Meanwhile, Genesis’ legal team has yet to comment on the issue.
Jack Baughman from JFB Legal, who is supervising the Genesis bankruptcy case, posted on Twitter that the SEC’s legal action is impeding the recovery of assets and causing additional complications in compensating Earn users.
