The SEC’s lawsuits against Gemini and Genesis are ongoing, the case is well established

Allegations by the US Securities and Exchange Commission that crypto companies Gemini and Genesis sold unregistered securities through the Gemini Earn scheme are sufficient to stand up in court and justify the continuation of the case, a federal judge has now ruled.

On page 32 Court document On March 13, New York District Court Judge Edgardo Ramos dismissed Gemini’s and Genesis’ motions to dismiss the SEC’s lawsuit.

The judge also rejected a separate request asking the court to halt the SEC’s demand that the companies stop selling securities and hand over Gemini Earn’s profits if the SEC wins the case.

However, Judge Ramos ruled that the SEC case of January 2023 “clearly proves” that Gemini Earn – a crypto savings product offered by Gemini and managed by Genesis – issued and sold unregistered securities, adding that In this context, the SEC also has sufficiently demonstrated that Gemini Earn meets the requirements of an investment contract under the Howey test – a legal framework for classifying securities.

Genesis “consolidated (assets) on its balance sheet,” rather than separating them, and loaned the funds to institutional borrowers, subject to its judgment and discretion,” and “customers’ expectations of profits were based on Genesis’ efforts,” Judge Ramos added.

The SEC’s claim that Gemini Earn’s contracts were also notes also stood, the ruling said. Debt is a debt instrument that obligates you to repay loans with interest.

“At this time, the court finds that the complaint establishes that the defendants issued and sold unregistered securities through the Gemini Earn program.”

However, the latest order does not mean that the judge will also rule in favor of the SEC on the real issue in the case – the regulator has not yet proven its case, and both sides will now continue to gather evidence.

Last month, Genesis said in a bankruptcy filing that it had agreed to a $21 million settlement with the SEC.

As of November 2022, Gemini Earn had approximately 340,000 customers and $900 million in assets under management, according to the SEC filing.

That same month, FTX filed for bankruptcy and Genesis decided to “temporarily suspend” withdrawals from Gemini Earn, citing “unprecedented market turbulence” and liquidity issues.

Genesis filed for bankruptcy in January last year following an SEC lawsuit. In February, Gemini agreed to pay $1.1 billion to Gemini Earn customers in a settlement with the New York Financial Services Commission (NYDFS) as part of Genesis’ bankruptcy proceedings.