Gemini and Genesis Lawsuit: SEC’s Power Play Raises Eyebrows
A recent development in the crypto world is the denial of Gemini and Genesis’ request to dismiss the SEC’s lawsuit by Judge Edgardo Ramos. The U.S. District Court in New York suggested that both companies may have violated securities regulations by offering unregistered securities based on the Howey and Reves standard tests.
- Gemini’s Earn, which launched in February 2021, offered an 8% interest on crypto investments.
- An SEC complaint in November 2022 revealed that Gemini Earn had amassed 340,000 users and $900 million in assets.
- Withdrawals were halted due to high demand exceeding available funds.
SEC’s Allegations
The judge found that Gemini Earn qualified as a security under the US Supreme Court’s Howey test. Customers invested in a common venture with an expectation of profit. Therefore, the SEC’s accusation that unregistered securities were sold through Gemini Earn is plausible.
Genesis Fallout
Genesis declared bankruptcy after the SEC filed the lawsuit. Gemini Trust Co. agreed to reimburse customers with at least $1.1 billion through a bankruptcy settlement with New York state. The judge acknowledged that Gemini Earn agreements qualify as notes, a type of debt security.
Legal Battles
In May 2023, both firms asked the court to drop the case, arguing that the SEC hadn’t proven their Master Digital Asset Loan Agreement was a security. The recent ruling allows both parties to proceed with pretrial discovery to gather evidence before trial.
Crypto Industry Challenges
The SEC’s case against Gemini and Genesis is just one of several high-profile lawsuits in the crypto industry. Companies like Coinbase, Kraken, and Binance also face allegations of illegal securities offerings. Binance’s case with the SEC is still ongoing despite settling with other agencies.
Hot Take: Cryptocurrency Regulation on the Rise
The denial of Gemini and Genesis’ request to dismiss the SEC’s lawsuit indicates a growing trend of regulatory scrutiny in the cryptocurrency industry. Companies offering crypto investment opportunities must ensure compliance with securities regulations to avoid legal consequences and potential financial losses. Stay informed about evolving regulations and be cautious when investing in crypto assets.
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