Gemini and Genesis seek to dismiss SEC lawsuit over defunct Earn product
Gemini's legal counsel insists that the product was not a security.
Gemini and Genesis have asked a judge to dismiss an SEC lawsuit concerning its Earn product, according to developments on May 26.
Genesis says Earn wasn’t a security
Jack Baughman, a lawyer for Gemini, wrote:
“The SEC claims that the contract setting up the Earn program was itself a security. Even if that were right … the SEC would then have to show 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 as the providers re-invested those assets.
Gemini said in its latest filing that this offer “was nothing more than a lending arrangement.” Though the company raised numerous points, its main argument focused on the fact that the contracts were not sold on a secondary market.
It said that, as a result, the lending agreements it engaged in do not constitute securities. It asked the court to “dismiss the complaint with prejudice.”
Baughman noted that Genesis has filed a similar motion to dismiss the case and said that Gemini is “happy to join this argument.”
Earn was halted in November
Genesis forced Earn to halt withdrawals in November 2022. Gemini then permanently closed the service on Jan. 10, 2023.
The SEC filed charges against Gemini and Genesis on Jan. 12, at which time it alleged that the firms offered unregistered securities and bypassed disclosure requirements.
Genesis’ lending arm additionally filed for bankruptcy on January 19, 2023. This has continually affected Gemini’s ability to obtain the funds that are owed to former Earn users. Recently, Gemini said that Genesis’s parent company missed a $630 million payment.
Baughman acknowledged those issues by noting that Genesis’ bankruptcy is “dragging on.” He said that the SEC case will only make compensating Earn users more difficult.
Earn users were owed up to $900 million in January.