Crypto Exchange Gemini Opposes SEC’s Lawsuit Against Gemini Earn Project
In the action, the SEC claims that Gemini’s creation of the Gemini Earn initiative, which enables users to lend digital assets to Genesis through particular loan agreements, violates securities laws by participating in the illegal sale of unregistered securities.
Identifying securities and demonstrating their sale are the two key elements of the SEC’s argument. The SEC’s ability to support these criteria is disputed by Gemini, though. They contend that the loan contracts themselves shouldn’t be categorized as securities. The idea that the entire Gemini Earn concept is security is also rejected by Gemini as being unjustifiable.
What Happened Between SEC and Gemini?
The legal dispute began in January when the SEC filed charges against cryptocurrency exchange Gemini Trust and lender Genesis Global Capital for selling unregistered securities to retail investors. Gemini Earn, a high-yield cryptocurrency lending service launched by Genesis and Gemini in February 2021, is the focus of the legal dispute.
In accordance with this strategy, Genesis borrowed cryptocurrencies from Gemini users and split any earnings with Gemini, which handled the transactions and assessed an agent fee that may reach 4.29% in some cases. The users were then given the rest of the proceeds.
According to the SEC, the Gemini Earn program offered unregistered securities. Genesis used its discretion while using the cryptocurrency assets of investors to produce income and pay interest to Gemini Earn participants. The SEC claims that because of improper registration, investors were denied access to vital information for making investment decisions. However, Gemini responded by claiming that any lending or borrowing required unanimous approval and that it was not mandatory from any side.