Bankrupt crypto lender Genesis Global Capital and exchange platform Gemini have filed a joint request for the dismissal of a lawsuit brought against them by the U.S. Securities and Exchange Commission (SEC). The SEC had accused both entities of selling unregistered securities through Gemini’s Earn program. According to recent court filings, the defendants are seeking to have the case thrown out, citing lack of evidence for the SEC’s allegations. Gemini, a well-known brand in the crypto space, has been at the forefront of developing innovative products for its users, and the recent lawsuit has been a setback for the platform.
The lawsuit, filed in January in a New York court, specifically targeted Gemini’s Earn program, which offers a yield-bearing product that the SEC claimed raised billions of dollars’ worth of crypto assets from hundreds of thousands of investors. The SEC further stated that Genesis, which is owned by the Digital Currency Group (DCG), used investors’ crypto assets to generate revenue and pay interest to Gemini Earn investors.
Gemini argued in its filings that while the Earn program allowed borrowers and lenders to engage in subsequent transactions, the platform itself did not require any lending or borrowing without the consent of all parties involved. Additionally, Gemini disputed the SEC’s characterisation of the tri-party Master Digital Asset Loan Agreement (MDALA) contract between Genesis, Gemini, and Earn users as an unregistered security, asserting that such a characterisation lacked legal and factual basis.
Gemini’s motion to dismiss further claimed that the SEC failed to adequately demonstrate that the MDALA was a security and did not provide sufficient evidence of any sales or offers made regarding the agreement.
In the original complaint, the SEC highlighted that Genesis held approximately $900 million in assets belonging to about 340,000 Gemini Earn investors. Shortly after freezing withdrawals from the platform in November, Genesis filed for bankruptcy protection in the United States.
SEC Chair Gary Gensler previously stated that the allegations were based on the assertion that Genesis and Gemini had offered unregistered securities to the public, sidestepping necessary disclosure requirements designed to safeguard investors. In response, Gemini co-founder Tyler Winklevoss criticised the lawsuit, referring to it as a “manufactured parking ticket.”