Gemini and Genesis have asked a judge to dismiss an SEC lawsuit related to the Earn product, according to developments on May 26.
Genesis says Earn wasn’t security
Jack Baughman, an advocate for Gemini, wrote:
“The SEC alleges that the contract to set up the Earn program was itself a security. Even if that were correct… the SEC would have to prove that the contract was sold. That never happened.”
Gemini offered Earn in partnership with Genesis Global Capital. This allowed users to earn interest on their crypto deposits while the providers reinvested those assets.
Gemini said in its latest filing that this offer was “nothing more than a loan agreement.” While the company made numerous points, the main argument centered on the fact that the contracts were not being sold on a secondary market.
It said that as a result, the loan agreements it has entered into do not constitute collateral. It asked the court to “dismiss the complaint with reservations”.
Baughman noted that Genesis has filed a similar motion to dismiss the case, saying Gemini is “happy to join this argument.”
Earn was discontinued in November
Genesis forced Earn to halt filming in November 2022. Gemini then closed the service permanently on January 10, 2023.
The SEC filed charges against Gemini and Genesis on Jan. 12, alleging that the companies offered unregistered securities and circumvented disclosure requirements.
The lending arm of Genesis also filed for bankruptcy on January 19, 2023. This has continuously affected Gemini’s ability to obtain the money owed to former Earn users. Recently, Gemini said Genesis’ parent company missed a $630 million payment.
Baughman acknowledged those problems by noting that the Genesis bankruptcy “has been dragging on”. He said the SEC case will only make compensating Earn users more difficult.
Earn users owed up to $900 million in January.
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