In a recent update, the cryptocurrency exchange Gemini, run by the Winklevoss twins, filed a motion to dismiss the SEC’s securities violation lawsuit.
Gemini Trust Co filed the request in Manhattan federal court on May 26 in response to a January 12 lawsuit by the US Securities and Exchanges Commission.
The litigation was against the exchange and a Digital Currency Group (DCG) subsidiary, Genesis Global Capital.
Gemini Counters SEC Securities Violation Suit
In detail, the SEC alleged that Gemini’s yield product, Earn, which allows investors to loan their crypto to Genesis in return for interest, is an unregistered security.
Also, the SEC said that Gemini and Genesis Global sold unregistered securities to retail investors through the Gemini Earn lending program.
The watchdog alleged that Genesis and Gemini raised billions of dollars in crypto assets from hundreds of thousands of investors through this product, deducting agent fees as high as 4.29 percent.
The SEC further mentioned that Genesis held $900 million in investor assets from 340,000 Gemini Earn investors before halting withdrawals and filing for bankruptcy in late January 2023.
In addition, the regulator accused the firms of bypassing disclosure requirements designed to protect investors.
In the May 26 filing, Gemini noted that it did not offer the loan agreements among itself, Genesis, and customers on secondary markets.
Again, the crypto exchange maintained no transfer of asset titles, and therefore the offering does not qualify as securities.
Gemini said in the filing:
“Accordingly, there was no requirement that any party register it with the SEC.”
Reuters reported that the SEC declined to comment on the issue, and the lawyers did not respond immediately but later said they would pursue a dismissal.
Gemini Fights To Return Finds To “Earn” Users
In a May 26 note to its customers, Gemini described the SEC’s lawsuit against its Earn program as ill-conceived.
The crypto exchange further noted that the regulator’s action does nothing to speed up the Genesis bankruptcy case or unlock assets that need to find their rightful owners.
Further, Gemini disclosed it filed a Master Claim on May 22 for the return of over $1.1 billion in digital assets, which remains locked on Genesis.
Gemini seeks to return the funds to the 232,000 Earn users whose loans were active as of January 19, 2023.
According to Gemini, DCG and the parties involved remain in negotiations relating to missed obligations to pay the Genesis Bankruptcy estate $630 billion due May 9-11, 2023.
Furthermore, Gemini noted in its blog post that it works with Genesis, the Unsecured Creditors Committee (UCC), and the Ad Hog Group of Creditors (AHC) on funds retrieval.
The crypto exchange affirmed that it would remain focused on its efforts to ensure “Earn” users get back their money.