Gemini Crypto Exchange Moves to Dismiss SEC Lawsuit. Details Inside…
Gemini, a well-known cryptocurrency exchange in the United States, has taken a tough stance on the US Securities and Exchange Commission (SEC) by filing a motion to drop the SEC case against them. The SEC filed this lawsuit in January 2023, accusing Gemini and Genesis, crypto lending platforms, of providing securities to ordinary investors without proper registration, in violation of the law.
Gemini recently recruited the help of JFB Legal, a well-known law firm, to deal with US regulatory authorities. JFB Legal co-founder Jack Baughman has publicly criticized the SEC case on Twitter, calling it “misunderstood”. The commission’s legal action against Gemini was centered on its Earn program, which debuted in February 2021. According to the SEC, the program was an unregistered offering of securities, leading Gemini to launch an investigation into possible securities infringement.
Customers can use the Get program to lend their bitcoins to Genesis in exchange for interest on their loan. Gemini plays the middle man, enabling transactions in exchange for a nominal fee. However, due to Genesis’ failure to comply with the redemption requests, the program was terminated in November 2022. Prior to the SEC’s action, in January 2023, Gemini canceled its arrangement with Genesis as Genesis suffered significant losses due to the dissolution of FTX.
According to Gemini’s dismissal request, the Earn program is not a securities offering. The business disputed the SEC’s contention that the Master Digital Asset Lending Agreement (MDALA), for which Gemini was appointed as agent, was an unregistered security. “This has no legal or factual basis,” the motion read. Additionally, the Complaint does not state how, when, or where MDALA was allegedly sold, or under what conditions.”
Baughman responded to the SEC’s allegations of offering unregistered securities: “The SEC claims that the contracts that make up the Earn program are themselves securities.” Even if that were true—which it isn’t—the SEC would have to show that the contract had been sold. It never happened.”
Gemini’s move to dismiss the complaint was based on two main points. It claims that MDALA is not a security or investment record. Second, although the commission considers MDALA safe, there is no evidence that it was sold or offered to anyone. “That summary makes a simple point,” Baughman emphasized. Earn contracts, whatever they are, are never sold. Who is the seller? Who are the buyers? How much does it cost? Is it possible to resell it? Everyone understands what selling is. No one is present. “The bottom line is simple but powerful.”
Gemini’s legal maneuvers demonstrate his determination to challenge the SEC’s allegations and protect his Earn program stance. The outcome of this legal battle between Gemini and the US government will influence the future of crypto-related legislation and the wider landscape of digital asset offerings.
