Federal Judge Allows SEC Lawsuit Against Gemini and Genesis to Proceed
A federal judge has ruled that the US Securities and Exchange Commission’s lawsuit against crypto firms Gemini and Genesis will proceed in court.
The judge’s decision comes after Gemini and Genesis attempted to have the lawsuit, which alleges the sale of unregistered securities through the Gemini Earn program dismissed.
In a 32-page order issued on March 13, New York District Court Judge Edgardo Ramos rejected the motions to dismiss filed by Gemini and Genesis, stating that the SEC’s allegations were plausible enough to continue with the legal proceedings.
Additionally, the judge denied a separate request by the companies to halt the SEC’s demand for them to cease selling securities and to hand over Gemini Earn profits if the SEC prevails in the lawsuit.
Judge Ramos acknowledged that the SEC’s lawsuit, filed in January 2023, “plausibly alleges” that the Gemini Earn program, a crypto yield-bearing product offered by Gemini and managed by Genesis, involved the sale of unregistered securities.
The judge further noted that the SEC had provided sufficient evidence to establish that Gemini Earn met the criteria of an investment contract under the Howey test, a legal framework used to classify securities.
According to Judge Ramos, Genesis had pooled assets on its balance sheet instead of segregating them, and it had lent funds to institutional borrowers based on its own discretion and judgment.
The judge also highlighted that customers’ expectation of profits was dependent on Genesis’ efforts.
The SEC’s claim that the Gemini Earn agreements constituted notes, which are debt securities obligating loan repayments with interest, was also upheld in the order.
However, it is important to note that the judge’s
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