coinculture.com
Genesis Global Capital and Gemini, both facing bankruptcy, have submitted court filings requesting the dismissal of a lawsuit brought by the Securities and Exchange Commission (SEC).
According to the filings, the SEC accused the two companies of selling unregistered securities. The lawsuit, filed in a New York court on Jan. 12, specifically targeted Gemini’s Earn product, which the SEC claimed was an unregistered offering that generated billions of dollars worth of crypto assets from numerous investors.
1/ I and the @JFBLegal team are proud to represent @Gemini. Today we filed our motion to dismiss the @SEC’s ill-conceived lawsuit against Gemini and Genesis relating to the Earn program.
— Jack Baughman (@JackBaughman27) May 26, 2023
The SEC’s complaint stated that Genesis, affiliated with CoinDesk and owned by the Digital Currency Group (DCG), utilised investors’ crypto assets at its discretion to generate revenue and pay interest to Gemini Earn investors.
Gemini stated that with their Earn program, both the borrower and lender could engage in subsequent transactions. However, it did not require any lending or borrowing on its part, and there was no provision for a lender to transfer or assign the program without the consent of all relevant parties.
Furthermore, Gemini disputed the SEC’s classification of the tri-party Master Digital Asset Loan Agreement (MDALA) contract between Genesis, Gemini, and Earn users as an unregistered security, asserting that such characterisation lacked legal and factual foundation.
The motion to dismiss the document claimed that the SEC failed to provide sufficient evidence to establish MDALA as a security. It argued that the SEC did not present factual allegations of the contract being sold to anyone or any party offering to sell it, rendering their claims unsubstantiated and speculative.
In the original complaint, the SEC highlighted that Genesis held approximately $900 million in assets belonging to around 340,000 investors using Gemini Earn. This was revealed when Genesis halted withdrawals from the platform in November, shortly before seeking bankruptcy protection in the United States.
SEC Chair Gary Gensler commented at the time, stating, “We allege that Genesis and Gemini offered unregistered securities to the public, bypassing disclosure requirements designed to protect investors.” In response, Gemini co-founder Tyler Winklevoss criticised the lawsuit, referring to it as a “manufactured parking ticket.”