Gemini files to dismiss SEC’s lawsuit over its earn product
Gemini Trust Co., a cryptocurrency exchange, and bankrupt lender Genesis Global Capital have jointly filed for the dismissal of a lawsuit brought by the Securities and Exchange Commission (SEC). The lawsuit claims that their Earn product violated securities regulations by offering unregistered securities.
In their legal filings, the companies contended that their Earn product, which facilitated coin lending for yield generation, should not be classified as a security. Genesis further argued that the transactions were essentially loans and requested the court to dismiss the complaint or, as an alternative, strike the SEC's requests for a permanent injunction and disgorgement.
Furthermore, the allegation stated that Gemini, rather than Genesis, was responsible for the customer-facing aspects of the Earn program. Gemini, which asserted its role as a transfer agent for Earn, criticized the SEC lawsuit as "ill-conceived" in its blog update addressed to Earn users.
Following the SEC's lawsuit in January, Genesis subsequently filed for bankruptcy, leading to Earn users facing withdrawal restrictions since mid-November. In response, Gemini filed a comprehensive claim on Monday, May 22, aiming to recover over $1.1 billion in assets for the benefit of 232,000 Earn users.
Gemini, Genesis and its parent company, Digital Currency Group, are in mediated negotiations this month trying to come up with a restructuring and settlement agreement. A preliminary deal from February hasn’t been finalized, and earlier this month, DCG missed a $630 million loan payment to Genesis.
Related: Coinbase continues effort to get mandamus for SEC response to rulemaking petition
Throughout this month, Gemini, Genesis, and its parent company, Digital
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