Gemini Moves To Dismiss SEC’s Lawsuit

Gemini, a leading American-based crypto platform, has filed a motion to dismiss the US Securities and Exchange Commission (SEC) lawsuit. Notably, in January 2023, the SEC announced its charges against Gemini and the crypto lending company Genesis. This came as the SEC alleged that the Earn program amounts to offering unregistered securities, thereby violating the law.

Gemini Responds To SEC’s Action

The crypto exchange firm founded by the Winklevoss twins, Tyler and Cameron, has filed a motion to dissolve the lawsuit brought against it by the SEC. The SEC’s case against Gemini revolves around its Earn program, launched in February 2021. According to the SEC, Gemini and Genesis platforms illegally sold unregistered securities through a program that promised high-interest rates to most investors under a Master Development and Loan Agreement (MDALA).

Further, the SEC alleged that Genesis holds about $900 million in assets from approximately 340,000 Gemini Earn customers. The Earn program enables customers to lend their cryptocurrencies to Genesis in exchange for interest. However, Gemini acted as an agent for its customers. On the other hand, Genesis received a small percentage of fees, up to 4.29%, for its services. However, the program was suspended in November 2022 and ultimately terminated in January 2023, prior to SEC’s lawsuit.

Nonetheless, per the latest developments, Gemini has onboarded JFB Legal for its faceoff with the SEC. Jeff Baughman, the founding partner of JFB Legal, has dubbed the US regulator ” ill-conceived” via a Twitter thread.

Further, exchange’s motion to dismiss brief argues that the Earn program was not a securities offering. The commission claims that the MDALA agreement, which makes Gemini the agent, was an unregistered security. The exchange platform contends that the SEC’s claims have no basis in law or fact. Additionally, it highlights the lack of information regarding the supposed sale or terms of the MDALA.

Nonetheless, Gemini and Genesis’s parent company, the Digital Currency Group (DCG), are in mediated negotiations to develop a restructuring and settlement agreement. Notably, a preliminary deal from February is yet to be finalized, as DCG missed a $630 million loan payment to Genesis earlier this month.

Baughman Remarks

Commenting on SEC’s unregistered securities offering claim, Baughman said:

The SEC claims that the contract setting up the Earn Program was a security. Even if that were right – it is not – the SEC would have to show that the contract was sold. However, that never happened.

However, the crypto firm has moved to dismiss the lawsuit on two main bases. Firstly, Gemini asserts that the MDALA is neither a security nor an investment note. Secondly, even if the SEC could reasonably consider the MDALA security, it fails to prove that it was sold or offered to anyone.

Baughman asserted:

The brief makes a simple point. Whatever the Earn contract might be, it was never sold. Who was the seller? Who was the buyer? How much did it cost? Could it be resold? Everyone is knowledgeable about what a sale is. It is undeniable there was not one here. The point seems simple but powerful.

Read More

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• Gemini Foundation, A Non-US Derivative Platform Goes Live
• Gemini in Mediation Period with Genesis to Recover Lost Funds
• Gemini Files A Pre-Registration To Adjust Its Canadian Operations
• Winklevoss-owned Gemini exchange to contribute $100m in cash to Genesis