Gemini, in collaboration with Genesis Global Capital, introduced Earn, an innovative service that enables users to earn interest on their cryptocurrency deposits. Through this partnership, the providers reinvest the deposited assets, allowing users to generate passive income through the interest accrued.
Gemini’s recent filing emphasized that their offer, according to their perspective, was merely a lending arrangement. While the company presented several points, its primary argument centred around the absence of contract sales on a secondary market.
According to the legal filings submitted by the companies, they argue that Gemini Earn should not be categorized as a security.
Genesis To Court: Dismiss Complaint
Genesis specifically asserts that the transactions can be considered as loans and has requested the court to either dismiss the complaint or, as an alternative, strike the SEC’s requests for a permanent injunction and disgorgement.
Contrary to the claim, it was stated that Gemini, not Genesis, held the responsibility for the customer-facing aspects of the Earn program. Gemini openly addressed Earn users in a blog update, characterizing the SEC lawsuit as “ill-conceived” while highlighting their role as a transfer agents for the program.
In November 2022, Genesis compelled Earn to suspend all withdrawals, which led to eventual permanent closure of the service by Gemini on January 10, 2023.
Shortly thereafter, on January 12, the Securities and Exchange Commission (SEC) filed charges against both Gemini and Genesis. The SEC alleged that the companies offered unregistered securities and circumvented disclosure requirements.
Gemini Alleges $630-M Missed Payment By Genesis Parent Company
On January 19, 2023, Genesis’ lending arm filed for bankruptcy, further exacerbating the impact on Gemini’s ability to recover funds owed to former Earn users. The exchange has faced ongoing challenges in retrieving these funds.
In recent developments, Gemini revealed that Genesis’s parent company failed to fulfil a $630 million payment. Simultaneously, Gemini, along with other creditors, is actively engaged in collaborating on an “amended plan of reorganization.”
In the event that the mediation process does not yield the desired results, this alternative plan can be pursued independently. The primary objective, as emphasized by the exchange in a blog post, is to secure the best possible outcome for Earn users.
According to Jack Baughman, a founding partner of JFB Legal, the legal representative for Gemini, the SEC’s case is exacerbating the difficulty and complexity of recovering assets from the Genesis bankruptcy in order to fully compensate Earn users.
Baughman argues that the SEC’s actions do not expedite the process or facilitate the release of assets that should rightfully be returned to Earn users.
Rather than pursuing the SEC’s case, Baughman suggests that the emphasis should be placed on accelerating the process of releasing assets to be returned to the affected users.
-Featured Image From City A.M, Chart From TradingView.com
