Cryptocurrency exchange Gemini and bankrupt cryptocurrency lender Genesis Global Capital have jointly filed to have a lawsuit filed by the US Securities and Exchange Commission (SEC) dismissed. The lawsuit calls “Gemini Earn” which lets customers lend out crypto assets like Bitcoin, Genesis, Gemini Charged fees of up to 4.29% - violating securities laws by offering unregistered securities.
Legal filings from the companies say Gemini Earn should not be classified as a security. Genesis argued that the transactions were loans in nature and asked the court to dismiss the complaint, or to dismiss the SEC's request for a permanent injunction and forfeiture of disappointment ment. Additionally , the allegations allege that Gemini, not Genesis, was responsible for the customer-facing aspects of the Earn program. Gemini, which announced it was serving as Earn's transfer agent, criticized the SEC's lawsuit as "badly conceived" in a blog up date for Earn users.
Following the SEC lawsuit in January, Genesis subsequently filed for bankruptcy, causing Earn users to face withdrawal restrictions since mid-November 2022. In response, Gemini filed a sweeping claim on Monday, May 22, aiming to recover $232,0 00 in assets earning users more than $1.1 billion.
Digital Currency Group (DCG), the parent company of Gemini and Genesis, is in mediation talks to work out a restructuring and settlement agreement. The preliminary February deal has yet to be finalized, and earlier this month DCG failed to pay Genesis a $630 million loan. Meanwhile, Gemini and other creditors are working together on an "amended restructuring plan" that could proceed independently if the mediation process fails. As the exchange stated in its blog post, the goal is to ensure the best possible outcome for Earn users.
Jack Baughman, founding partner of JFB Legal, which represents Gemini, said in a tweet that the SEC case will only make it harder and more complicated to recover assets from Genesis bankruptcy to keep Earn users intact. It does nothing to speed up the process and unlock assets that need to be returned to Earn users.
