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Gemini and Genesis seek to dismiss SEC lawsuit over defunct Earn product

WikiBit 2023-05-29 15:57

Abstract:Gemini's legal counsel maintains that the product in question does not fall under the category of a security.

On May 26, Gemini and Genesis submitted a request to the court to dismiss the SEC lawsuit related to their Earn product.

Genesis says Earn wasnt a security

According to Gemini's lawyer, Jack Baughman, in response to the SEC lawsuit, he stated that the contract establishing the Earn program was not a security, and even if it were, the SEC would need to demonstrate that the contract was sold, which never occurred.

Gemini collaborated with Genesis Global Capital to offer the Earn product, enabling users to earn interest on their cryptocurrency deposits through reinvestment by the providers. In their recent filing, Gemini argued that this offering constituted a lending arrangement rather than a security. Their primary argument centered around the fact that the contracts were not sold on a secondary market.

Gemini asserted that the lending agreements they entered into should not be considered securities and requested the court to dismiss the complaint with prejudice. Baughman highlighted that Genesis has also filed a motion to dismiss the case, and Gemini is supportive of this argument.

Earn was halted in November

In November 2022, Genesis compelled Earn to suspend withdrawals, and subsequently, on January 10, 2023, Gemini permanently discontinued the service. Following these events, on January 12, the SEC filed charges against Gemini and Genesis, alleging the offering of unregistered securities and violation of disclosure requirements.

Furthermore, Genesis's lending division filed for bankruptcy on January 19, 2023, which has had a continuous impact on Gemini's ability to recover the funds owed to former Earn users. Gemini recently disclosed that Genesis's parent company failed to fulfill a $630 million payment.

Acknowledging these challenges, Baughman acknowledged that Genesis's ongoing bankruptcy proceedings are impeding the resolution. He expressed concern that the SEC case would further complicate the compensation process for Earn users.

In January, Earn users were owed up to $900 million.

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