Bankrupt crypto lender Genesis Global Capital and exchange platform Gemini are urging a U.S. court to drop a lawsuit filed by the Securities and Exchange Commission (SEC). The lawsuit alleges that the two platforms sold unregistered securities through Gemini’s yield-bearing product, Earn. According to the SEC, Genesis and Gemini “raised billions of dollars’ worth of crypto assets from hundreds of thousands of investors” via the unregistered offering.
The SEC’s complaint goes on to say that Genesis exercised discretion in the use of investors’ crypto assets to create revenue and pay interest to Gemini Earn investors. However, Gemini has countered these claims in recent court filings. The exchange platform argues that the SEC’s portrayal of the Master Digital Asset Loan Agreement (MDALA) – a contract made between Genesis, Gemini, and Earn users – as an unregistered security “has no basis in law or fact.”
Gemini further states that its Earn program did not necessarily require any lending or borrowing by any party. Moreover, the platform contends that there was “no way for a lender to transfer or assign it without the affirmative consent of all parties.” In the document supporting their motion to dismiss, Gemini claims that the SEC falls short in “adequately plead[ing]” the MDALA was a security. It also states that the SEC fails “to make non-conclusory allegations that the MDALA was sold to anyone, or that any party offered to sell it.”
At the heart of the matter, the SEC’s original complaint highlights that Genesis held around $900 million in assets from around 340,000 Gemini Earn investors. Furthermore, the agency points out that withdrawals from the platform were frozen in November, just before Genesis filed for bankruptcy protection in the United States.
SEC Chair, Gary Gensler, stated that they “allege that Genesis and Gemini offered unregistered securities to the public, bypassing disclosure requirements designed to protect investors.” The response to this lawsuit from Gemini co-founder, Tyler Winklevoss, was to label it as a “manufactured parking ticket.”
In summary, the ongoing legal dispute between the SEC and the crypto platforms Gemini and Genesis Global Capital revolves around the sale of unregistered securities. While the SEC claims that the platforms bypassed disclosure requirements, Gemini and Genesis argue that the MDALA is not a security and therefore, has no basis in law. With both sides presenting their arguments, the fate of the lawsuit remains uncertain.
Source: Coindesk
