Gemini and Genesis submit an application to dismiss the SEC lawsuit against Earn products

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Von: Krypto News Österreich

The crypto exchange Gemini and the bankruptcy lender for digital assets Genesis Global Capital have jointly submitted an application for a lawsuit from the US stock exchange regulator SEC (Securities and Exchange Commission) against their EARN program.

According to a document that was submitted to the US district court for the southern district of New York on Friday, May 26th, Gemini and Genesis insisted that the SEC had no legal basis for referring to the EARN product as a sale of non-registered securities.

Gemini and Genesis ask the court to reject the SEC lawsuit

remember that the SEC submitted a complaint against Gemini and Genesis in January for alleged sale of non-registered securities to private investors in the USA via the Gemini Earn program.

The program launched in December 2020 was discontinued at the beginning of the year after genesis had stopped withdrawing and the customer of Gemini could no longer pay interest due to insufficient liquid funds due to the downturn in the cryptom market. The fate of the hundreds of thousands of Gemini investors who owed genesis over $ 900 million is still unknown, since Genesis applied for insolvency protection according to Chapter 11 in January.

The SEC claimed that Gemini and Genesis had avoided disclosure obligations that were created to protect investors and violated federal securities laws.

"Regardless of the uniqueness of the Mdala and the restrictions on its use, the SEC tries to transform the Earn program into something that it was not: the sale of not registered securities." While the SEC points out that the application of the Federal Working Act is obvious here, the complaint is a new attempt to expand its area of ​​application beyond a reasonable reading of the relevant legal texts, ”said Gemini and Genesis.

a trade agreement, no investment contract

The defendant continued to insist that the Master Digital Asset Loan Agreement (MDALA) was not an investment contract for the Gemini Earn program. The agreement was never sold or offered for sale, could not be traded on a secondary market, did not include a transfer of ownership of a financial value and did not require any credit or credit by anyone.

Gemini and Genesis argued that the MDALA was a trade agreement that is not under section 5 of the Securities Act, which prescribes the sale or offer to sell a securities.

The crypto companies informed the court that it would mean ignoring the “clear meaning” of the Securities Act if one would allow the SEC to continue with the case.

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