Loading...

Gemini and Genesis File Motion to Dismiss SEC Lawsuit

In this post:

  • Gemini and Genesis jointly filed a motion to dismiss the SEC lawsuit against their “Earn” product, which offered yields to customers against their crypto deposits.
  • The crypto exchange aims to recover over $1.1 billion in assets for approximately 232,000 Earn users affected by Genesis’ bankruptcy. The companies are engaging in mediated negotiations and collaborative restructuring to find a resolution.

Gemini, a prominent cryptocurrency exchange, and Genesis Global Capital, a bankrupt crypto lender, have jointly filed a motion to dismiss the Securities and Exchange Commission’s (SEC) lawsuit against their “Earn” product. The lawsuit alleges that Gemini Earn, a service that allowed customers to earn yields on their crypto deposits, violated securities regulations by offering unregistered securities. 

Gemini and Genesis have argued that Gemini Earn should not be classified as a security, asserting that the transactions were essentially loans. In their legal filings, the companies are seeking the dismissal of the complaint or, alternatively, the removal of the SEC’s requests for a permanent injunction and disgorgement.

Challenging the Classification of Gemini Earn

Gemini and Genesis have taken a firm stance, contending that cryptocurrency exchange Earn does not fall under the category of a security. The companies maintain that the transactions facilitated through the service were tantamount to loans, further strengthening their case for dismissal. In their court filings, both entities have called for the complaint to be dismissed entirely or for certain SEC requests to be struck down. This legal battle raises fundamental questions about the classification of digital assets and the regulatory framework surrounding them.

Addressing the allegations, Gemini has emphasized that it was responsible for the customer-facing aspects of the Earn program, while Genesis played a distinct role as the crypto lender. The exchange has publicly criticized the SEC lawsuit, describing it as “ill-conceived” in a blog update specifically directed towards Earn users. 

The cryptocurrency exchange has been proactive in its efforts to protect the interests of Earn users, who have faced withdrawal restrictions since mid-November 2022 due to Genesis filing for bankruptcy. The exchange filed a comprehensive claim on behalf of Earn users, aiming to recover over $1.1 billion in assets for approximately 232,000 affected individuals.

Mediated Negotiations and Collaborative Restructuring

Gemini’s parent company, the Digital Currency Group (DCG), is engaged in mediated negotiations with Genesis to establish a restructuring and settlement agreement. Although a preliminary deal was proposed in February, it has not yet been finalized. Complicating matters further, DCG recently missed a $630 million loan payment to Genesis, adding to the challenges faced by Earn users in reclaiming their assets. 

In parallel, Gemini and other creditors are collaborating on an “amended plan of reorganization” that can be pursued independently if the mediation process fails. The ultimate objective is to ensure the best possible outcome for Earn users, as expressed by Gemini in its blog post.

Seeking Resolution for Earn Users

Jack Baughman, a founding partner of JFB Legal representing Gemini, took to Twitter to express concern over the SEC lawsuit’s impact on the retrieval of assets from the Genesis bankruptcy. Baughman stated that the lawsuit hampers the process of making Earn users whole by adding unnecessary complications and delays. Instead, he believes the focus should be on expediting the release of assets to be returned to the affected users. 

Conclusion

Gemini and Genesis have filed a motion to dismiss the SEC’s lawsuit, challenging the classification of Gemini Earn as a security and arguing that the transactions conducted through the service were loans. The ongoing legal battle raises important questions about the regulatory landscape for digital assets. Meanwhile, efforts are underway to recover assets for Earn users, with Gemini and other creditors collaborating on a restructuring plan.

Disclaimer. The information provided is not trading advice. Cryptopolitan.com holds no liability for any investments made based on the information provided on this page. We strongly recommend independent research and/or consultation with a qualified professional before making any investment decisions.

Share link:

Most read

Loading Most Read articles...

Stay on top of crypto news, get daily updates in your inbox

Related News

U.S. House Approves FIT21 Crypto Bill
Cryptopolitan
Subscribe to CryptoPolitan