U.S. Crypto Firms Gemini and Genesis File Motions to Dismiss SEC Lawsuit

SEC crackdown on Gemini Earn

U.S. cryptocurrency exchange Gemini and lender Global Capital have filed a motion to dismiss a lawsuit filed by the U.S. Securities and Exchange Commission (SEC), according to court documents dated 26th. revealed through. If the motion to dismiss the action is granted, the action will be dismissed.

In January, the SEC sued Genesis and Gemini for selling unregistered securities under a program called “Gemini Earn,” which they jointly operated. According to the complaint, Genesis entered into an agreement with Gemini in December 2020 that allowed Gemini customers to lend cryptocurrencies to Genesis and receive interest.

The SEC alleges that Gemini Earn hoped to raise money from investors so that Gemini and Genesis could operate and generate revenue together. As a result, Gemini Earn’s services fall under the category of offering and selling securities, and prior registration with the SEC was required.

So far, however, Gemini and Genesis have argued that the SEC’s allegations lack legal basis. In a document seeking to dismiss the complaint, Gemini noted that “the SEC has not adequately established the fact that this loan constitutes an investment contract or securities note.”

connection:Crypto Lending Firm Genesis Files For Bankruptcy With Gemini, Van Eck And Other Creditors

What is the Gemini Earn Program?

The Gemini Earn program allows users to earn interest on the virtual currency they hold in Gemini. It was claimed that this interest would be compounded daily and the crypto assets could be withdrawn at any time.

However, following the FTX bankruptcy in November 2022, Genesis fell into a liquidity crisis and suspended withdrawals from the platform. According to the SEC, at this point Genesis had deposited approximately ¥126 billion ($900 million) in assets from 340,000 Gemini investors.

In December 2022, Gemini discontinued the Gemini Earn program. And in January 2023, Genesis filed for bankruptcy under the US bankruptcy law. As of today, retail investors who invested in Gemini Earn have yet to recover their cryptocurrencies.

connection:Gemini Considers DCG Default Avoidance, Significant Debt Repayment Moves

SEC Actions Against Cryptocurrency Companies

Even after this lawsuit, the SEC continues to take a tough stance on the cryptocurrency industry. In February 2011, the Kraken Exchange in the United States was sued for violating securities laws for its “staking” service.

In March, it issued a Wells notice to launch an investigation into Coinbase Earn, a cryptocurrency and staking service provided by Coinbase, one of the largest exchanges in the United States. And in April, it filed a lawsuit against another US exchange, Bittrex, for trading six stocks.

These series of actions demonstrate that the SEC is actively pushing for greater oversight and regulation of the cryptocurrency industry. In fact, in April 2011, SEC Chairman Gary Gensler strongly expressed his view that “the cryptocurrency industry does not comply with the law” at a hearing of the US House Financial Services Committee.

Meanwhile, Coinbase criticized the SEC for continuing to arbitrarily file lawsuits against the industry without presenting a “workable framework for regulating cryptocurrencies.” He argues that it should be subject to judicial review.

connection:Coinbase submits court documents to SEC

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