In a legal tussle at the intersection of cryptocurrency
and regulation, Gemini, the American cryptocurrency exchange, has taken a
formidable stance against the Securities and Exchange Commission (SEC). In a
move to dismiss the ongoing lawsuit, Gemini has filed a reply memorandum in the
US District Court for the Southern District of New York.
The SEC’s lawsuit
contends that Gemini Earn, a platform that lets users lend out their crypto
assets in exchange for interest payments, violated regulations by offering
unregistered securities. However, according to the court document filed on August
18, Gemini has alleged that the SEC is unable to clearly define the nature of the
alleged unregistered security.
Central to Gemini’s
defence is the notion that the SEC’s argument lacks consistency. The company
points out that the regulator has oscillated between labelling the Master
Digital Asset Loan Agreement (MDALA) and Gemini Earn program as the alleged
security.
Gemini’s responses
encapsulate its conviction that simplicity should guide the resolution of the
lawsuit. The crypto asset exchange suggests that instead of delving into
complex analyses, the court should pose straightforward questions.
Similar views were
expressed by Jack Baugham, the Founding Partner of JFB Legal representing
Gemini, who pointed out on X platform the SEC’s shifting stance throughout the legal
proceedings. Baughman remarked that the SEC’s evolving definition of the
securities in question undermined its credibility.
Unravelling the
Allegations
The SEC’s accusations stem from the unregistered sale of securities through the Gemini
Earn program. The regulator argued that this unregistered offering reportedly
garnered billions of dollars from hundreds of thousands of retail investors, raising
concerns about investor protection. According to the charges filed in January,
the critical factor that drew regulatory attention was the alleged lack of
registration of the securities associated with the program.
In November 2022,
Genesis, the partner in the lending program, announced its inability to permit
investors to withdraw their crypto assets due to a shortfall of assets caused
by market volatility . This left approximately USD $900 million in investors’
assets from 340,000 participants of the Gemini Earn program in limbo.
In July, Finance
Magnates reported that
Gemini had sued
Digital Currency Group (DCG) and
its CEO, Barry Silbert, over their alleged involvement in Genesis’ debts.
According to Gemini, its users participated in the Gemini Earn Program, lending
their crypto assets to Genesis for profit.
Additionally, the
lawsuit alleged that DCG and Silbert misrepresented the security of the lending
process, leading users to suffer financial harm. However, the DCG responded to the
lawsuit, dismissing it as a ‘publicity stunt’.
In its dismissal
motion, DCG stated that
it had no direct operational involvement with Gemini’s Earn program. On August
10, DCG argued that Gemini actively encouraged its customers to participate in
this program and that the exchange represented itself as a sophisticated market
participant that had thoroughly vetted Genesis.
In a legal tussle at the intersection of cryptocurrency
and regulation, Gemini, the American cryptocurrency exchange, has taken a
formidable stance against the Securities and Exchange Commission (SEC). In a
move to dismiss the ongoing lawsuit, Gemini has filed a reply memorandum in the
US District Court for the Southern District of New York.
The SEC’s lawsuit
contends that Gemini Earn, a platform that lets users lend out their crypto
assets in exchange for interest payments, violated regulations by offering
unregistered securities. However, according to the court document filed on August
18, Gemini has alleged that the SEC is unable to clearly define the nature of the
alleged unregistered security.
Central to Gemini’s
defence is the notion that the SEC’s argument lacks consistency. The company
points out that the regulator has oscillated between labelling the Master
Digital Asset Loan Agreement (MDALA) and Gemini Earn program as the alleged
security.
Gemini’s responses
encapsulate its conviction that simplicity should guide the resolution of the
lawsuit. The crypto asset exchange suggests that instead of delving into
complex analyses, the court should pose straightforward questions.
Similar views were
expressed by Jack Baugham, the Founding Partner of JFB Legal representing
Gemini, who pointed out on X platform the SEC’s shifting stance throughout the legal
proceedings. Baughman remarked that the SEC’s evolving definition of the
securities in question undermined its credibility.
Unravelling the
Allegations
The SEC’s accusations stem from the unregistered sale of securities through the Gemini
Earn program. The regulator argued that this unregistered offering reportedly
garnered billions of dollars from hundreds of thousands of retail investors, raising
concerns about investor protection. According to the charges filed in January,
the critical factor that drew regulatory attention was the alleged lack of
registration of the securities associated with the program.
In November 2022,
Genesis, the partner in the lending program, announced its inability to permit
investors to withdraw their crypto assets due to a shortfall of assets caused
by market volatility . This left approximately USD $900 million in investors’
assets from 340,000 participants of the Gemini Earn program in limbo.
In July, Finance
Magnates reported that
Gemini had sued
Digital Currency Group (DCG) and
its CEO, Barry Silbert, over their alleged involvement in Genesis’ debts.
According to Gemini, its users participated in the Gemini Earn Program, lending
their crypto assets to Genesis for profit.
Additionally, the
lawsuit alleged that DCG and Silbert misrepresented the security of the lending
process, leading users to suffer financial harm. However, the DCG responded to the
lawsuit, dismissing it as a ‘publicity stunt’.
In its dismissal
motion, DCG stated that
it had no direct operational involvement with Gemini’s Earn program. On August
10, DCG argued that Gemini actively encouraged its customers to participate in
this program and that the exchange represented itself as a sophisticated market
participant that had thoroughly vetted Genesis.