Cryptocurrency exchange Gemini has filed a reply brief in the U.S. District Court for the Southern District of New York, seeking to dismiss a lawsuit brought against it by the United States Securities and Exchange Commission (SEC). The lawsuit alleges that Gemini’s service, known as Gemini Earn, breached securities regulations by offering unregistered securities.
Gemini’s forceful defense
Gemini’s legal team, represented by JFB LEGAL, PLLC, and SHEARMAN & STERLING LLP, mounted a robust defense, arguing that the SEC’s complaint lacks plausibility and is based on conclusory statements. The reply brief, filed on August 18, 2023, challenged the SEC’s failure to answer essential questions such as when the alleged security was sold, who were the buyer and seller, and what price was offered or charged.
The document also emphasized that the court should adhere to basic legal principles and the plain meaning of the Securities Act. It contended that the SEC’s inability to identify securities at issue underscored the weakness of its position and called for the dismissal of the complaint with prejudice.
Background and ongoing controversy
The legal battle centers on Gemini Earn, a service enabling customers to lend crypto assets like Bitcoin to Genesis. The SEC alleges that this service breached securities regulations, a claim that Gemini has consistently contested.
On May 27, Gemini argued that transactions within the Gemini Earn program were loans, asking the SEC to dismiss the complaint. The exchange further contended that the SEC must first identify the unregistered security and then pinpoint the sale or offer to sell that security, a burden it claimed the SEC had not met.
The case took a public turn when Jack Baugham, a founding partner of JFB Legal, made a statement on X (formerly Twitter), suggesting that the SEC was changing its argument as the lawsuit progressed. Baugham’s statement highlighted the contradictory nature of the SEC’s argument and described the regulator’s stance as “floundering.”
The legal battle between Gemini and the SEC has drawn attention to the complex landscape of cryptocurrency regulation. As the case unfolds, it raises critical questions about the definition and classification of securities within the crypto space.
The public statements and strong legal arguments from both sides continue to fuel a debate beyond the courtroom, reflecting broader uncertainties and challenges in the crypto industry.
