Crypto exchange Gemini and bankrupt digital asset lender Genesis Global Capital have jointly filed a motion to dismiss a U.S. Securities and Exchange Commission (SEC) lawsuit against the Earn program. ‘ancient.
According to a document filed with the United States District Court for the Southern District of New York on Friday, May 26, Gemini and Genesis insisted that the SEC had no legal basis for describing the Earn product as the sale of securities not registered, as it was a crypto asset. loan service.
Gemini and Genesis Ask Court to Dismiss SEC Lawsuit
Recall that the SEC filed a lawsuit against Gemini and Genesis in January for allegedly selling unregistered securities to retail investors in the United States through the Gemini Earn program.
The program, launched in December 2020, was closed earlier this year after Genesis halted withdrawals and could no longer pay interest to Gemini customers due to insufficient liquid assets resulting from the market downturn in cryptography. The fate of the hundreds of thousands of Gemini investors who owed more than $900 million to Genesis remains unknown, as the latter filed for Chapter 11 bankruptcy in January.
The SEC alleged that Gemini and Genesis circumvented disclosure requirements created to protect investors and violated federal securities laws.
“Notwithstanding the unambiguous nature of the MDALA and the limitations on its use, the SEC seeks to transform the Earn program into something it was not: the sale of unregistered securities. While the SEC suggests that the application of federal securities laws is evident here, the complaint is yet another attempt to expand their reach beyond any reasonable reading of the relevant statutory language,” Gemini and Genesis said.
A trade agreement, not an investment contract
Defendants further insisted that the Master Digital Asset Lending Agreement (MDALA) for the Gemini Earn Program was not an investment agreement. The agreement was never sold or offered for sale, could not be traded on any secondary market, did not involve the transfer of ownership of any assets and did not require any lending or borrowing from anyone. either.
Gemini and Genesis argued that the MDALA was a business arrangement not covered by Section 5 of the Securities Act, which requires the sale or offer for sale of a security.
The crypto entities told the court that allowing the SEC to pursue the case would ignore the “plain meaning” of the Securities Act.
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