U.S. judge rejects SEC’s motion to dismiss lawsuit against Gemini Earn program
A U.S. district judge has denied a request by the Securities and Exchange Commission to dismiss a case brought by cryptocurrency exchange Gemini and cryptocurrency lender Genesis regarding their Gemini Earn program.
Judge Edgardo Ramos said in an order Wednesday in the U.S. District Court for the Southern District of New York that the SEC “plausibly alleged” that Genesis Global Capital, LLC and Gemini Trust Company, LLC offered and sold unregistered securities.
The judge cited the Howey test and the Reves test, which implement a multi-step test to determine whether assets fall within the securities laws.
“Under Howey and Reves, the SEC plausibly asserted that defendants offered and sold unregistered securities through the Gemini Earn program,” Judge Ramos said. “As a result, defendant’s motion to dismiss is denied.”
1 year in preparation
SEC first charged In January 2023, Genesis and Gemini made an unregistered offer and sale of securities to individual investors through Gemini Earn. In 2021, the company led by the Winklevoss twins launched Gemini Earn, allowing Gemini clients to earn money from the now-bankrupt Genesis Global Capital, LLC and Earn Up to 7.4% APY.
In the complaint, the SEC said Gemini Earn investors “reasonably expected to benefit from Defendants’ efforts.”
“It is fully reflected in this complaint that Gemini Profit investors had an expectation of profit,” Judge Ramos said Wednesday. “Defendants marketed Gemini Earn as an investment opportunity and publicly touted its ability to generate returns for investors.”
Genesis and Gemini found It dismissed the SEC’s lawsuit in May, arguing that the assets involved were not securities. Genesis argued that Gemini Earn involved originating loans, not securities.
Digital Currency Group, the parent company of Gemini and Genesis, did not immediately respond to a request for comment.
Disclaimer: The Block is an independent media outlet delivering news, research and data. As of November 2023, Foresight Ventures is a majority investor in The Block. Foresight Ventures invests in other companies in the cryptocurrency space. Cryptocurrency exchange Bitget is an anchor LP of Foresight Ventures. The Block continues to operate independently to provide objective, impactful and timely information about the cryptocurrency industry. Below are our current financial disclosures.
© 2023 The Block. All rights reserved. This article is provided for informational purposes only. It is not provided or intended to be used as legal, tax, investment, financial or other advice.
