Genesis, Gemini says SEC ask is at expense of Earn customers
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A pair of crypto firms are looking to dismiss a lawsuit brought by a top U.S. financial regulator.
Driving the news: Digital Currency Group unit Genesis Global Capital, along with crypto exchange Gemini, filed a motion Friday asking the court to dismiss the SEC's complaint against them related to Gemini’s Earn program, court documents show.
Catch up fast: The SEC in January charged Genesis and Gemini with selling unregistered securities, pointing to a contract called a Master Digital Loan Agreement struck among lender Genesis, Gemini and customers in its yield-bearing Earn program.
What they're saying: Legal representation for Genesis argued "the SEC’s single claim — for a violation of Section 5 of the Securities Act of 1933 — is legally deficient because the Complaint fails to plead facts that would elevate the loan agreements into securities."
- Between the lines: "Sometimes, a loan is just a loan," they wrote.
- Gemini's legal counsel filed a motion in support of Genesis.
Of note: The SEC also sought a permanent injunction against both parties, seeking to restrain them from conducting the businesses that are allegedly violating federal securities laws, and ordering them to give up any profits that they made doing so.
- Genesis' counsel is pushing back on that as well, saying the SEC has not alleged "any likelihood that the now-shuttered Gemini Earn program will restart" and so hasn't provided a basis for that restraint.
The bottom line: Between Genesis' bankruptcy proceeding and Gemini's customers being creditors in that, the SEC's ask would fly counter to what it wants to achieve, they argued.
- Monetary penalties would "come directly at the expense of GGC’s other creditors, including the same exact Gemini Earn customers the SEC has ostensibly brought this action to protect."
