In a significant move, Gemini, the cryptocurrency exchange operated by the Winklevoss twins, has filed a motion to dismiss the SEC’s securities violation lawsuit. This comes after the US Securities and Exchanges Commission filed a lawsuit on January 12 against Gemini and Digital Currency Group (DCG) subsidiary, Genesis Global Capital.
The SEC claims that Gemini’s yield product, Earn, which enables investors to lend their cryptocurrencies to Genesis for interest, is an unregistered security. Additionally, the regulator alleges that both Gemini and Genesis Global sold unregistered securities to retail investors through the Gemini Earn lending program. By doing so, they raised billions of dollars in crypto assets from hundreds of thousands of investors and deducted agent fees as high as 4.29%.
According to the SEC, Genesis held $900 million in investor assets from 340,000 Gemini Earn customers before stopping withdrawals and filing for bankruptcy in late January 2023. Furthermore, the firms are accused of sidestepping disclosure requirements designed to protect investors.
However, in their May 26 filing, Gemini argues that the loan agreements among itself, Genesis, and customers were not offered on secondary markets, and no transfer of asset titles took place. As a result, they contend that the offering does not qualify as securities. Gemini maintains that no registration with the SEC was necessary. Although the SEC declined to comment, lawyers ultimately stated they would pursue a dismissal.
In a customer update on May 26, Gemini characterized the SEC’s lawsuit against its Earn program as ill-conceived. It furthers its argument by stating that the regulator’s action does not expedite the Genesis bankruptcy case or unlock assets that need to be returned to rightful owners.
The exchange also disclosed that it filed a Master Claim on May 22 for the recovery of over $1.1 billion in digital assets still held by Genesis. Gemini aims to return these funds to the 232,000 Earn users whose loans were active as of January 19, 2023. Currently, DCG and other involved parties are in discussions regarding missed payments of $630 billion to the Genesis Bankruptcy estate, which were due May 9-11, 2023.
Gemini remains committed to working with Genesis, the Unsecured Creditors Committee (UCC), and the Ad Hoc Group of Creditors (AHC) to retrieve funds for its Earn users. The exchange’s priority is ensuring that these customers recover their money.
Source: Cryptonews
