Crypto-exchange Gemini and bankrupt crypto-broker Genesis have filed motions to dismiss on the case brought by the US SEC, which accused them of offering unregistered securities.
Gemini and Genesis and the filing of the SEC case
In a court document filed on 26 May 2023, Gemini’s crypto-exchange and Genesis’ now-bankrupt crypto-lender ask for a motion to dismiss on the case filed by the US Securities and Exchange Commission (SEC).
The subject of the lawsuit is Gemini’s “Earn” asset lending program, involving Genesis Global Capital as a third-party borrower, in a contract called the Master Digital Asset Loan Agreement or MDALA.
In the motion to dismiss, the two crypto companies specify that the MDALA is an agreement formed as a framework for the Earn program, and that it is not a loan agreement, which can be transferred or sold.
On this basis, lawyers for Gemini and Genesis follow closely with the argument against the SEC’s ill-intentioned interpretations of the MDALA, writing the following:
“Notwithstanding the unambiguous nature of the MDALA, and the limitations on how it could be used, the SEC seeks to turn the Earn program into something it was not: the sale of unregistered securities.
While the SEC suggests that application of the federal securities laws is obvious here, the Complaint is a novel attempt to expand their scope beyond any reasonable reading of the relevant statutory language.
Specifically, the SEC claims that the MDALA—which was entered into as a prerequisite to participation in the Earn program—is itself the unregistered security. This has no basis in law or fact.”
The events surrounding Gemini, Genesis and the SEC
It was January 2023, when after an investigation by the SEC, the regulator had charged Gemini and Genesis for allegedly offering unregistered securities.
Specifically, the SEC complaint alleges that “through this unregistered offering, Genesis and Gemini raised billions of dollars’ worth of crypto assets from hundreds of thousands of investors.”
At the time, the crypto broker of Digital Currency Group (DCG), Genesis, was already facing the scandal of having $3 billion in debt, while its owner was trying to sell venture assets to raise money and resolve the issue. Genesis also filed for Chapter 11 bankruptcy.
At the present time, Genesis has been threatened with being sued by Gemini itself for failing to pay $630 million.
Not only that, Gemini CEO Cameron Winklevoss has also reportedly threatened to sue DCG CEO Barry Silbert regarding repayment of a $900 million loan.
Gemini’s announcement of European headquarters in Ireland
As the SEC makes life increasingly difficult for crypto companies in the US, many are looking for other escape routes to continue with their business.
Joining this list of crypto companies is Gemini, which has just announced in recent days that it has chosen the crypto-exchange’s European headquarters in Ireland.
Following a meeting of the Winklevoss twins, the co-founders of Gemini, with the Prime Minister of the Republic of Ireland, it became apparent that MiCA‘s European regulation is a perfect match for the US platform.
Not surprisingly, the text of the European MiCA clarifies precisely the ongoing confusions in the US with regard to crypto regulation, involving cryptocurrencies, NFTs, stablecoins and tokens in general.
Not only that, dedicated to crypto-exchanges, the MiCa presents precisely a guideline to follow in order to be compliant with regulations.