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On Friday, May 26, crypto exchange Gemini along with bankrupt lender Genesis filed to dismiss a lawsuit by the U.S. Securities and Exchange Commission (SEC) alleging that the earn product amounts to offering unregistered securities.
Gemini said that its Earn product which offered yields to customers to lend out coins wasn’t a security. In the filing, Genesis also mentioned that all these transactions, in effect, were loans. Thus, it asked the court to dismiss the complaint, or “in the alternative, strike the SEC’s requests for a permanent injunction and disgorgement.”
The complaint from the SEC also argues that Gemini and not Genesis “ran the customer-facing operations of the Earn program”. However, the crypto exchange said that it was just a transfer agent for the Earn product while calling the SEC lawsuit “ill-conceived”.
Just before crypto lender Genesis filed for bankruptcy, the SEC sued both companies earlier this year in January 2023. Ever since crypto lender Genesis went into trouble following the collapse of crypto exchange FTX, Earn users haven’t been able to withdraw their money since November 2022.
Gemini Vs DCG
As Gemini’s Earn users suffer, it has taken the battle up with Genesis’ parent Digital Currency Group (DCG). Earlier this week on Monday, Gemini filed a master claim seeking the return of over $1.1 billion in assets to 232,000 Earn users.
Gemini and DCG have been looking to find a middle ground and have been negotiating in order to come up with a restructuring and settlement agreement. Earlier this month, DCG missed a loan payment of $630 million to Genesis. Thus, Gemini has warned that the parent group DCG could be at risk of defaulting.
Gemini’s filing against the SEC comes at a time when the exchange is looking to set up base in the United Kingdom amid the growing regulatory uncertainty in their home country of the US.
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