SEC Lawsuit Against Gemini And Genesis Is Moving Forward

Key Points:

• The judge denies dismissal in the SEC lawsuit against Gemini and Genesis for unregistered securities.
• The dispute centers on Gemini Earn, which was accused of offering securities, not loans.
• The ruling’s implications extend to cryptocurrency regulation.

A ruling by US District Judge Edgardo Ramos in New York has paved the way for the Securities and Exchange Commission (SEC) to continue its legal action against cryptocurrency companies Gemini Trust Co. and Genesis Global Capital.

SEC Lawsuit Against Gemini and Genesis Upheld by Judge

The SEC alleges that the companies illegally offered unregistered securities through their Gemini Earn product.

The SEC lawsuit against Gemini and Genesis, filed in January 2023, accuses the two companies of violating securities laws by offering an interest-paying product called Gemini Earn. Customers could lend their cryptocurrency through this platform to earn interest.

Despite arguments from the defendants that these were loan agreements and not securities, Judge Ramos upheld the SEC lawsuit against Gemini Earn, stating that the program met the Supreme Court’s test for security.

Gemini Earn, launched in 2021, offered customers up to 8% interest on crypto investments. However, in November 2022, Genesis halted withdrawals, leading to the program’s closure in January 2023. Genesis subsequently filed for bankruptcy.

Cryptocurrency Industry Awaits Ruling’s Implications on Securities Definition

In response to motions to dismiss filed by Gemini and Genesis, Judge Ramos denied them, allowing the case to move forward. The ruling enables both sides to proceed with evidence gathering for trial. Gemini Trust Co., founded by Cameron and Tyler Winklevoss, recently agreed to return at least $1.1 billion to customers through the Genesis bankruptcy settlement with the state of New York.

The outcome of this case could have significant implications for the regulation of cryptocurrency offerings and platforms in the United States as courts grapple with defining digital assets within the framework of securities law.