Gemini and Genesis Fight Back Against SEC Lawsuit – The Securities and Exchange Commission (SEC) of the United States filed a lawsuit against Gemini and Genesis in January 2023 for allegedly providing unregistered securities to American customers. The SEC complaint alleges that “through this unregistered offering, Genesis and Gemini raised billions of dollars’ worth of crypto assets from hundreds of thousands of investors.”
Lawyers for Gemini and Genesis maintained in a court document filed on May 26, 2023 that the SEC’s “complaint must be dismissed” because the “Master Digital Asset Loan Agreement (MDALA)” tied to Gemini’s Earn program is “not a security.” According to the lawyers, the SEC is seeking to turn the Earn program into something it was never intended to be.
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The dismissal motion for Gemini and Genesis states: “While the SEC suggests that application of the federal securities laws is obvious here, the complaint is a novel attempt to expand their scope beyond any reasonable reading of the relevant statutory language.”
The Securities and Exchange Commission’s complaint against Gemini and Genesis is not the first time that securities regulators have taken action against interest-bearing cryptocurrency platforms. Prior to Celsius and Blockfi’s bankruptcy filings, securities officials from various states filed complaints and cease-and-desist orders against them.
Despite the SEC’s complaints about interest-bearing accounts, Gemini and Genesis contend that the MDALA is not a security. “The reality is that the MDALA was never sold or offered for sale, could not be traded on any secondary market, did not involve the transfer of title to any asset, and did not require any lending or borrowing by anyone,” the dismissal motion adds.
The two crypto companies claim that even if the SEC adequately alleged that the MDALA is a security, the regulator “failed to make non-conclusory allegations that the MDALA was sold to anyone, or that any party offered to sell it.”