Gemini Trust Co.,the exchange founded by the Winklevoss twins, Tyler and Cameron, has filed a request in Manhattan federal court seeking the dismissal of a Securities and Exchange Commission (SEC) lawsuit. The SEC has accused Gemini Trust Co. and cryptocurrency lender Genesis Global Capital, a subsidiary of Digital Currency Group, of unlawfully selling unregistered securities through their program called ‘Giave Earn’. A hundred thousand investors were offered high interest rates under the scheme.
The lawsuit, filed by the Securities and Exchange Commission on January 12, was directed at Gemini Earn, a service that allows customers to lend cryptocurrencies such as bitcoin to Genesis. For facilitating these loans, Gemini would charge an agent fee of up to 4.29%. The SEC alleged that through Gemini Earn, Gemini and Genesis raised billions of dollars in crypto assets. However, after the FTX crypto exchange owned by Sam BankmanFriedd stopped functioning last November, Genesis suspended withdrawals.
According to the SEC, Genesis held about $900 million in assets from approximately 340,000 customers who took part in a program called Gemini Earn. The securities regulator said that the Gemini and Genesis companies did not comply with disclosure requirements intended to protect investors.
Gemini stated on Friday that the loan agreements between itself, Genesis and its customers were not securities. The company alleged that the agreements were not sold or traded in secondary markets, nor had they transferred ownership of their assets, thereby exempting them from classification as securities. Gemini contended that no party was obligated to register these agreements with the SEC.
The SEC has refrained from commenting on the matter, and Genesis has yet to respond to requests for comment. According to a previous statement by Genesis’ lawyer, it also intends to seek dismissal of the case.
The SEC has been actively cracking down on the cryptocurrency industry since Gary Gensler assumed the position of SEC chair in 2021. Gensler has underlined the importance of enforcement of securities rules on the crypto market, pointing to a case brought against Gemini and Genesis as an indication that it is necessary to comply with existing regulations.
The lawsuit, officially titled SEC v Gemini Trust Co et al, is currently being heard in the U.S. District Court for the Southern District of New York under case number 23-00287.
Source : Person, & Stempel, J. (2023, May 26). Winklevoss Twins’ Exchange seek dismissal of SEC lawsuit over Gemini Earn. Reuters. https://www.reuters.com/legal/winklevoss-twins-exchange-seek-dismissal-sec-lawsuit-over-gemini-earn-2023-05-26/