SEC Lawsuit Against Crypto Firms Gemini and Genesis Proceeds in Court
Summary:
In a recent legal development, a U.S. federal judge has allowed the case against crypto firms Gemini and Genesis, accused by the SEC of selling unregistered securities through the Gemini Earn program, to proceed. Despite the defendants' dismissal attempts, the allegations have been deemed plausible. The SEC now needs to back up its claims with evidence in court. Previously, Gemini Earn agreed to refund $1.1 billion to its customers via Genesis' bankruptcy proceedings after being sued by the SEC.
A U.S. federal judge has deemed the case against crypto businesses Gemini and Genesis, filed by the U.S. Securities and Exchange Commission (SEC), worthy of further legal proceedings. The case revolves around allegations of unregistered security sales through the Gemini Earn program. Despite the defendants' attempts to get the lawsuit dismissed, New York District Court Judge Edgardo Ramos upheld the case in a detailed order dated March 13.
In addition, the judge turned down a separate appeal aiming to halt the SEC from demanding termination of security sales and potential profit submission from Gemini Earn if the SEC comes out victorious. Judge Ramos acknowledged the SEC's 2023 case suggesting plausible allegations against Gemini Earn - a crypto product that yields interest, operated by Gemini and managed by Genesis - of dealing in unregistered securities.
He further noted that the SEC adequately affirmed that Gemini Earn fitted the definition of an investment contract under Howey Test legal parameters, which are used to classify securities. Genesis was observed to have mingled its assets rather than isolating them and then lending them to institutional borrowers based on its own decisions and judgements.
The court order also upheld the SEC's claim that Gemini Earn contracts were notes - a debt security that involves loan repayments with interest. Still, the order does not affirm that the judge will side with the SEC. The regulator must still substantiate its accusations and all parties involved will proceed in collecting evidence.
Previously, Genesis had announced settling its lawsuit with the SEC for a sum of $21 million during a bankruptcy court hearing. As of November 2022, Gemini Earn reportedly had about 340,000 customers with assets estimated at $900 million under its management, according to the SEC's lawsuit.
However, following the bankruptcy of FTX in the same month, Genesis chose to temporarily halt withdrawals from Gemini Earn due to unanticipated market disruptions and liquidity concerns. After being sued by the SEC in January of the previous year, Genesis filed for bankruptcy. Later, in February, Gemini agreed to reimburse $1.1 billion to its Gemini Earn users via Genesis' bankruptcy settlement - a decision made in agreement with the New York financial regulator.
Published At
3/14/2024 9:19:17 AM
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