Gemini and Genesis moved to throw out a lawsuit built on securities violation claims made by the U.S. Securities and Exchange Commission.
In January, the U.S. watchdog filed a suit arguing that Gemini and Genesis offered unregistered securities and ignored investor protection procedures.
Crypto exchange Gemini filed that the regulator’s view of a tri-party MDALA contract between the digital asset entities and Earn Users “has no basis in law or fact.”
Gemini and Genesis filed to throw out a lawsuit claiming securities law violations submitted by the U.S. Securities and Exchange Commission (SEC) in connection to an Earn Program offered by the Winklevoss-founded crypto exchange.
In January, the commission wrote that Gemini and bankrupt Genesis raised billions from investors who tapped into Gemini’s Earn product. Earn boasted hundreds of thousands of users who had access to crypto borrowing and lending facilities.
At the time, Gemini co-founder Tyler Winklevoss called the suit a “manufactured parking ticket” while lawyers from both the crypto exchange and Genesis filed that the suit “has no basis in law or fact.”
According to the U.S. watchdog, Gemini did not register Earn in line with securities laws before offering the product to investors. The suit further argued that Genesis, one of the sides in a tri-party agreement, deployed client funds toward revenue generation strategies. Genesis also directed part of this revenue to Earn subscribers in the form of interest, a business model that must be cleared by regulators per the commission’s stand.
The filing from the watchdog insisted that Gemini and Genesis failed to protect investors by not providing proper disclosure regarding Earn.
SEC, U.S. Regulators Tighten Grip On Crypto Enforcement
Gemini and Genesis are two entities in a growing list of companies under pressure from U.S. regulators. Kraken was forced to shut down its staking service for American customers supposedly for breaking local law. The exchange also paid a $30 million fine but did not admit to any violations.
Paxos and Binance were also subjects of lawsuits and enforcement actions as regulators across the U.S. crackdown on allegedly illegal players. The uncertainty surrounding regulations in America has now galvanized entities like Coinbase to seek offshore options.