Gemini, a renowned cryptocurrency exchange in the United States, has taken a tough stance against the US Securities and Exchange Commission (SEC) by submitting a motion to dismiss the SEC’s case against them. The SEC filed this lawsuit in January 2023, accusing Gemini and Genesis, a crypto-lending platform, of providing securities to ordinary investors without appropriate registration, violating the law.
Gemini has recently recruited the assistance of JFB Legal, a famous legal company, to deal with the US regulatory authority. JFB Legal’s founding partner, Jack Baughman, openly criticized the SEC’s case on Twitter, calling it “ill-conceived.” The commission’s legal action against Gemini is centered on its Earn program, which debuted in February 2021. According to the SEC, this program constituted an unregistered securities offering, causing Gemini to conduct an inquiry into possible securities violations.
Customers may use the Earn program to lend their bitcoins to Genesis in return for interest on their loans. Gemini served as a middleman, enabling the transaction in exchange for a nominal fee. However, owing to Genesis’s failure to match redemption demand, the program was discontinued in November 2022. Prior to the SEC’s action, in January 2023, Gemini canceled its arrangement with Genesis since the latter had incurred significant losses as a result of FTX’s demise.
According to Gemini’s request to dismiss, the Earn program was not a securities offering. The business disputes the SEC’s contention that the Master Digital Asset Lending Agreement (MDALA), in which Gemini is designated as the agent, is an unregistered security. “This has no basis in law or fact,” the motion reads. Furthermore, the Complaint does not mention how, when, or where the MDALA was allegedly sold, or on what conditions.”
Baughman responds to the SEC’s accusation of an unregistered securities offering: “The SEC claims that the contract establishing the Earn program was itself a security.” Even if that were correct—which it is not—the SEC would have to demonstrate that the contract was sold. That never occurred.”
Gemini’s move to dismiss the complaint is based on two main points. It claims that the MDALA is neither a security nor an investment note. Second, even if the commission considers MDALA security, there is no evidence that it was sold or offered to anybody. “The brief makes a simple point,” Baughman emphasizes. The Earn contract, whatever it was, was never sold. Who was the vendor? Who was the purchaser? What was the price? Is it possible to resell it? Everyone understands what a sale is. There was none present. “The point is straightforward but powerful.”
Gemini’s legal maneuver demonstrates its determination to challenge the SEC’s charges and protect its Earn program stance. The result of this legal battle between Gemini and the US government will affect the future of crypto-related legislation and the larger landscape of digital asset offers.