Gemini and Genesis have asked a judge to dismiss an SEC lawsuit over its Earn product, according to developments on May 26.
Genesis says Earn wasn’t a security
Jack Baughman, an attorney for Gemini, wrote:
“The SEC claims that the contract setting up the Earn program was itself a security. Even if it were true… then the SEC would have to show that the contract was sold. It never happened.
Gemini proposed Earn in partnership with Genesis Global Capital. This allowed users to earn interest on their crypto deposits when providers reinvested those assets.
Gemini said in its latest filing that this offer “was nothing more than a loan agreement.” Although the company raised many points, its main argument was that the contracts were not sold in a secondary market.
It specified that consequently, the loan contracts to which it is committed do not constitute security. He asked the court to “dismiss the complaint with prejudice”.
Baughman noted that Genesis had filed a similar motion to dismiss the case and said Gemini was “happy to join this argument.”
Earn was discontinued in November
Genesis forced Earn to suspend withdrawals in November 2022. Gemini then permanently shut down the service on January 10, 2023.
The SEC filed charges against Gemini and Genesis on Jan. 12, when it alleged the companies offered unregistered securities and circumvented disclosure requirements.
The Genesis lending arm also filed for bankruptcy on January 19, 2023. This has continually affected Gemini’s ability to obtain funds owed to former Earn users. Recently, Gemini said Genesis’ parent company missed a $630 million payment.
Baughman acknowledged these issues, noting that Genesis’ bankruptcy is “dragging on.” He said the SEC case would only make it more difficult for Earn users to be compensated.
Earn users up to $900 million in January.
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