Genesis, a bankrupt lender, has requested a US court to dismiss the SEC lawsuit which targets the Earn Program, along with Gemini

The bankrupt crypto lender, Genesis Global Capital, and exchange platform Gemini are requesting that a U.S. court dismiss a lawsuit filed by the Securities and Exchange Commission (SEC) alleging that the two entities sold unregistered securities. Court filings from Friday show that the SEC filed the lawsuit in January in a New York court and targeted Gemini’s yield-bearing product, Earn, which was an unregistered offering through which the regulator alleged that the two entities “raised billions of dollars’ worth of crypto assets from hundreds of thousands of investors.” According to the SEC complaint, Genesis exercised its discretion on how to use investors’ crypto assets to generate revenue and pay interest to Gemini Earn investors, as alleged in the complaint. Gemini, in its Friday filings, said that while the borrower and lender could choose to engage in subsequent transactions with the Earn program, “it did not itself require any lending or borrowing by any party, and there was no way for a lender to transfer or assign it without the affirmative consent of all parties.” Gemini also alleged that the SEC’s treatment of the tri-party Master Digital Asset Loan Agreement (MDALA) contract between Genesis, Gemini and Earn users as an unregistered security “has no basis in law or fact.” The SEC failed to “adequately plead” that MDALA was a security and failed “to make non-conclusory allegations that the MDALA was sold to anyone, or that any party offered to sell it,” according to the document supporting a motion to dismiss. In its original complaint, the SEC noted that Genesis held around $900 million in assets belonging to some 340,000 Gemini Earn investors when it froze withdrawals from the platform in November shortly before filing for bankruptcy protection in the U.S. SEC Chair Gary Gensler said at the time that “We allege that Genesis and Gemini offered unregistered securities to the public, bypassing disclosure requirements designed to protect investors.” Gemini co-founder Tyler Winklevoss fired back at the suit, calling it a “manufactured parking ticket.”

Read more: SEC Alleges Gemini, Genesis Sold Unregistered Securities

Edited by Parikshit Mishra.