Cryptocurrency exchange Gemini counters SEC lawsuit over Gemini Earn’s alleged unregistered securities offering, emphasizing lack of evidence and ongoing mediation for fair creditor compensation.
Key Points
- Cryptocurrency exchange Gemini responds to SEC lawsuit on Gemini Earn in New York court.
- Gemini’s legal defense challenges SEC’s claims of offering “unregistered securities.”
- Focus on Gemini Earn service, accused of violating securities regulations; exchange disputes allegations.
- Genesis bankruptcy affects Gemini Earn users; ongoing mediation seeks fair compensation for creditors.
Cryptocurrency exchange Gemini has recently filed a reply brief in response to a lawsuit initiated by the United States Securities and Exchange Commission (SEC).
The lawsuit, currently being heard in the U.S. District Court for the Southern District of New York, accuses Gemini’s service, Gemini Earn, of offering “unregistered securities” in violation of securities regulations.
Gemini’s legal defense, represented by firms JFB LEGAL, PLLC and SHEARMAN & STERLING LLP, has been robust.
The reply brief, dated August 18, 2023, challenges the SEC’s claims, arguing that their complaint is based on “conclusory statements” and lacks concrete evidence.
Gemini’s defense highlights the SEC’s failure to answer important questions, such as the details of the alleged security transaction, including when it was sold, who were the buyer and seller, and at what price it was offered.
Today, we filed @Gemini’s reply brief in support of our motion to dismiss @SECGov’s ill-conceived lawsuit about Gemini Earn. Our brief is available here: https://t.co/SuyV3SpR5a.
The SEC claims that by setting up the Gemini Earn program and giving users the opportunity to lend…
— Jack Baughman (@JackBaughman27) August 18, 2023
Gemini Earn at the Center of Controversy
The focus of the lawsuit revolves around Gemini’s service, Gemini Earn, which allows customers to lend crypto assets like Bitcoin to Genesis.
The SEC claims that this service violates securities regulations. However, Gemini has consistently disputed this allegation. In May, the exchange argued that transactions within the Gemini Earn program were simply loans, urging the SEC to dismiss the complaint based on this perspective.
Adding to the public discourse, Jack Baugham, a founding partner of JFB Legal, criticized the SEC’s inconsistent arguments and described their approach as “floundering.”
Previous Legal Challenges
Earlier this year, US regulators filed a lawsuit against both Gemini and Genesis Global Capital, alleging unregistered securities trading through the Gemini Earn program. Additionally, investors accused Gemini and its co-founders of fraudulent activities.
In an official blog post, Gemini addressed the lawsuit, denouncing it as “ill-conceived.” They highlighted the clarity of “Section 5 of the securities act” and criticized the SEC for their ambiguous stance on the matter.
The Downfall of Gemini Earn
Genesis served as the primary lender for the Gemini Earn program, which boasted an impressive annual return of over 8%.
Digital Currency Group (DCG) borrowed $1.65 billion from Genesis and allocated these funds primarily to Three Arrows Capital and the cryptocurrency exchange FTX.
Unfortunately, both entities declared bankruptcy in 2022, causing challenges for Gemini Earn users in recovering their investments.
To maintain transparency, the Gemini Earn website has been regularly updated with the latest developments.
As of August 18th, mediation sessions between Gemini and Genesis were held on August 16th and 17th, with Genesis extending the mediation to August 23rd.
Gemini has expressed concerns about the extended negotiations with DCG and aims to ensure fair compensation for Genesis’s creditors, including Gemini Earn users. DCG defaulted on a payment of $630 million to the Genesis bankruptcy estate between May 9th and 11th.
Despite facing a motion by DCG and its CEO, Barry Silbert, to dismiss a fraud lawsuit, Gemini remains steadfast in its stance.
They are set to respond to this motion by September 14th. On a positive note, Genesis has reached a settlement agreement with the FTX estate, reducing FTX’s claim against Genesis from $3.7 billion to $175 million.
This settlement promises better recoveries for all affected creditors.
