Gemini and Genesis crypto platforms have jointly condemned the SEC’s lawsuit against their Earn product as ill-conceived. The duo firms motioned the court to dismiss the case.
According to reports, the Securities and Exchange Commission (SEC) filed a court case against the Gemini crypto platform for offering ‘Earn Products. In the lawsuit, SEC stated that Gemini Earn product allows users to lend digital assets like BTC to Genesis, with Gemini deducting a fee of about 4.30% illegal.
The regulator claimed the platform violated its rules by offering users unregistered securities. Refuting the regulator’s accusations, Gemini exchange and Genesis Global Capital (a crypto lender firm that went bankrupt), jointly motioned a federal court to dismiss SEC’s claim against Gemini.
In their filings, the two firms argued that Gemini’s Earn product is not a security. They said their transactions were mainly loans and petitioned the court to dismiss the accusations. Alternatively, they requested the court to strike the plaintiff’s motions for a permanent bid.
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Furthermore, the regulators indicated in its lawsuit that Gemini was responsible for the Earn product scheme and not Genesis. Meanwhile, Gemini was identified as the transfer agent for the product.
Gemini Seeks Dismissal, Plans To Recover Funds
Defending itself, Gemini claimed that the Securities and Exchange Commission’s lawsuit against it is ill-conceived. The firm stated this in a recent blog post it sent to its Earn product users, addressing the lawsuit issue.
According to reports, the Genesis lender platform filed for Chapter 11 bankruptcy shortly after the SEC’s case against Gemini in January. Subsequently, the issue caused the platform to restrict Earn customers from withdrawing their funds since mid-November last year.
On Monday, Gemini filed a claim in court as it aims to recover about $1.1 billion in crypto assets which belong to over 232,000 Earn product customers.
Meanwhile, Digital Currency Group (DCG), the parent company for Genesis and Gemini, is currently negotiating how to create a settlement and restructuring strategy. As of now, DCG is yet to finalize the previous settlement deal made in February.
In addition, reports showed that the group missed a loan repayment to Genesis which was worth about $630 million, earlier this month. Furthermore, Gemini and some other creditors are reportedly deliberating on an “amended plan of reorganization.”
They plan to execute the amended plan independently should the mediation procedure flunks. Generally, the firm claimed via the post that they aim to achieve the optimal result for Earn product users.
Jack Baughman, a cofounder of JFB Legal (Gemini’s attorney), recently tweeted that SEC’s lawsuit makes it difficult to recover assets lost during Genesis’s bankruptcy. It delays the repayment process and unlocks assets meant to be returned to Earn users, according to Baughman.