Gemini and Genesis argue that the Gemini Earn program should not be classified as an offer of securities.
It is a simple loan agreement, and no sales of so-called investment contracts were made in the secondary market, the creators assure.
The transactions could be viewed as loans, so the companies have asked the court to dismiss the regulator’s lawsuit or to make an alternative ruling – overturning the SEC’s requirement for a permanent injunction against the program.
Gemini executives called the SEC’s lawsuit ill-conceived. It is Gemini Exchange, not Genesis, that is responsible for most aspects of the Gemini Earn client program.
When Genesis declared bankruptcy in January 2023, it had a bad impact on Gemini’s ability to recover funds belonging to Earn users.
In addition, a few days ago the parent company of Genesis, Digital Currency Group, was unable to fulfill a payment for the exchange Gemini in the amount of $630 million.
The trading floor is actively involved in working with other lenders on an amended reorganization plan.
Jack Baughman, founder of JFB Legal, the law firm that represents Gemini, says the SEC lawsuit makes it difficult to deal with assets that should rightfully be returned to Gemini Earn users.
Earlier this year, Gemini Exchange terminated its credit agreement with Genesis Global Capital, and the Gemini Earn program, which allowed users to make cryptocurrency deposits on Genesis’ service through Gemini and earn passive income, was shut down.
Termination of the program due to lack of liquidity in Genesis, which contributed to the collapse of the exchange FTX.
In the wake of numerous user complaints, the SEC accused Gemini Exchange and credit service Genesis of unregistered sales of securities as well as noncompliance with disclosure requirements.
Gemini founders Tyler and Cameron Winklevoss recently said they plan to set up headquarters in the U.K.
They are ready to leave the U.S. because of the hostile regulatory environment in the country.