U.S Court Rejects Motion to Dismiss SEC Complaint on Gemini Earn Program

• Genesis and Gemini were first served with charges by the SEC in January 2023.
• Genesis said that the creation of loans, and not securities, was involved in Gemini Earn.

In a complaint launched by the U.S SEC over the Gemini Earn program, a U.S. district court dismissed petitions by crypto lender Genesis and crypto exchange Gemini to dismiss the case.

The SEC “plausibly alleged” that Genesis Global Capital, LLC and Gemini Trust Company, LLC marketed and sold unregistered securities, according to Judge Edgardo Ramos’ ruling in Wednesday’s U.S. District Court for the Southern District of New York.

Unregistered Securities Claim

Moreover, the court referenced the Howey and Reves Tests, which provide a multi-factor examination for determining whether an asset is subject to the securities laws.

Judge Ramos stated:

“Under both Howey and Reves, the SEC has plausibly alleged that Defendants offered and sold unregistered securities through the Gemini Earn program. As a result, Defendants’ motions to dismiss are DENIED.”

Moreover, Genesis and Gemini were first served with charges by the SEC in January 2023 for engaging in the unregistered sale and offer of securities to retail investors via Gemini Earn. Also, customers of Gemini may borrow cryptocurrency from the now-defunct Genesis Global Capital, LLC and earn an annual percentage yield (APY) of up to 7.4 percent in 2021 via Gemini Earn, a platform run by the Winklevoss twins. Furthermore, according to the SEC’s legal filing, investors in Gemini Earn “reasonably expected to profit from the efforts of defendants.”

Judge Ramos further mentioned:

“The complaint sufficiently alleges that Gemini Earn investors had an expectation of profits. Defendants marketed Gemini Earn as an investment opportunity and publicly touted investors’ ability to earn returns.” 

May saw Genesis and Gemini’s attempts to have the SEC’s complaint against them dismissed on the grounds that the assets in question did not constitute securities. Moreover, Genesis said that the creation of loans, and not securities, was involved in Gemini Earn.

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