Gemini Trust Co., a cryptocurrency exchange, and bankrupt lender Genesis Global Capital jointly filed a motion to dismiss a lawsuit filed by the Securities and Exchange Commission (SEC). The lawsuit alleges that their Earn product violated securities regulations by offering unregistered securities.
In its legal filings with the company he claimed that their product Earn, which facilitated the lending of coins to generate income, should not be classified as a security. Genesis further argued that the transactions were essentially loans and asked the court to dismiss the complaint or alternatively strike the SEC’s requests for a permanent injunction and disgorgement.
The indictment further alleged that Gemini, rather than Genesis, was responsible for the customer-facing aspects of the Earn program. Gemini, which asserted its role as a transfer agent for Earn, criticized the SEC’s lawsuit as “ill-conceived” in a blog post. addressed to earn users.
In response to The SEC filing in JanuaryGenesis subsequently filed for bankruptcy, leading to Earn users facing withdrawal restrictions from mid-November. In response, Gemini filed a comprehensive lawsuit on Monday, May 22 to recover more than $1.1 billion in assets benefiting 232,000 Earn users.
Gemini, Genesis and their parent company Digital Currency Group are trying to come up with a restructuring and settlement agreement in mediated talks this month. AND preliminary the February deal was not finalized and earlier this month DCG missed a $630 million loan to Genesis.
Related:Coinbase continues to seek a writ of mandamus for the SEC’s response to the rulemaking petition
During this month, Gemini, Genesis and its parent company Digital Currency Group (DCG) have engaged in mediated negotiations to reach a restructuring and settlement agreement. While a tentative agreement was proposed in February, it has not been formally concluded. Additionally, earlier this month DCG failed to earn $630 million Genesis loan payment.
At the same time, Gemini and other creditors are working together on a “modified plan of reorganization” that can be implemented independently if the mediation process fails. The goal is to ensure an optimal outcome for Earn users, the exchange said in its blog post.
IN tweetJack Baughman, founding partner of JFB Legal, who is handling the case, said the SEC case only makes it more difficult and complicated to recover assets from the Genesis bankruptcy and make Earn users whole. It does nothing to speed up the process and unlock assets to be returned to Earn users.
Magazine: Cryptocurrency Regulation: Does SEC Chairman Gary Gensler Have the Last Word?
