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Judge Edgardo Ramos denied dismissing a case that the US Securities & Exchange Commission had brought against the US District Court for the Southern District of New York. The agency had plausibly alleged that Gemini Trust Company and Genesis Global Capital were engaged in offering unregistered securities through their Gemini Earn program. The motion to dismiss has been denied, citing two factors: the Howey Test and the Reves Test.
Charges on both companies were first laid in January last year, that is, 2023. The SEC had said that they had reasonable elements to believe that investors expected profits from the efforts of the defendants. Judge Ramos agreed, stating that the product was indeed marketed as an investment opportunity, enticing the public to expect returns.
That does sound true, considering the Gemini Earn program was launched to facilitate the granting of loans to users. Gemini users could leverage their crypto holdings and grant them to others as a loan in return for 7.4% APY. According to reports, the loan was extended to Genesis Global Capital, which has now been declared bankrupt.
Launched in 2021 by the Winklevoss twins, the Gemini Earn program made its way to the market as a chance to earn better APYs simply by granting cryptos as loans.
The model has backfired despite Gemini claiming they intended to create loans, not securities. The SEC continued its allegations amid filing a Motion to Dismiss in May. Gemini remains confident that the ultimate ruling will be in their favor. Jack Baughman, the outside counsel for Gemini, said that was just a preliminary ruling as the case has a long way to go.
The Founding Partner of Baughman Kroup Bosse PLLC re-established that the sale of securities was not involved at any point in the process, adding that the program was not itself a security either.
Founded in 2014, Gemini is based in New York, US, with more than 80 coins and over 660 trading pairs listed on the platform. Its objective has been to become a reliable crypto exchange with a set of unique features. This includes great UI, mobile applications, and crypto payments, among others. More such features of Gemini can be read in our Gemini exchange review. It further talks about the fee structure and ways to invest in the platform.
Digital Currency Group, the parent company of Genesis, has yet to comment on the matter at the time of writing this article. Gemini is confident about better placing its cards in court, while the SEC is likely to take this as a win, with the sentiments strengthening its other legal battles, too.
The Gemini Earn program has been at the centre of the discussion since its launch. SEC taking a legal course only changed the dynamics of the Program in the market.