Gemini Challenges SEC Lawsuit Over Gemini Earn

Gemini Trust Company, a prominent American cryptocurrency exchange, has lodged a response memorandum in the US District Court for the Southern District of New York.

This move is part of their effort to contest the ongoing lawsuit brought against them by the US Securities and Exchange Commission (SEC).

Earlier this year, regulatory authorities in the United States initiated legal action against Gemini and Genesis Global Capital, accusing them of engaging in the trading of unregistered securities via the Gemini Earn crypto asset lending initiative.

The SEC's claim suggests that these activities allowed the platforms to accumulate substantial amounts of cryptocurrency assets from their customers.

The lawsuit emerged following a separate legal complaint from investors, alleging fraudulent practices by Gemini and its co-founders.

Subsequently, both Genesis and Gemini aimed to have the lawsuit dismissed by asserting that the Gemini Earn program shouldn't be categorised as a security.

What is Gemini Earn?

The Gemini Earn program is a way for people to lend their cryptocurrency assets and earn interest on them.

The SEC claims that this form of lending activity equates to trading securities without the proper legal registration.

Not Under SEC Purview

The companies argued that the transactions were effectively loans and therefore didn't fall under the SEC's purview. Gemini further conveyed its dissent towards the lawsuit through an official blog post, labeling it as "ill-conceived."

On August 18, Gemini submitted a memorandum to the court, urging the dismissal of the SEC's lawsuit against them.

The platform argued that the lawsuit's allegations were vague and lacked clear arguments.

While acknowledging the relative clarity of Section 5 of the securities act, Gemini pointed out that the regulators failed to articulate a distinct standpoint.

The platform stated:

"The SEC's uncertainty about the security in question only highlights the fragility of its position."

Gemini emphasised that important inquiries about the sale of the allegedly unregistered securities remained unanswered by the regulators.

They called upon the court to reject the "complex" assertions made by the SEC.

Additionally, Gemini underlined the fundamental legal principles that bolstered their request for the lawsuit's dismissal.

According to their submission, a claim must be "plausible" and should not rest on "conclusory allegations."