Genesis Global Holdco, undergoing bankruptcy proceedings and the bitcoin exchange Gemini filed in court a motion to dismiss the SEC lawsuit against their joint Earn program.
In January 2023, the Commission accused partners of selling unregistered securities. The suit confirmed media reports of Genesis Global Holdco indebtedness to the exchange’s clients totaling $900 million. The interests of 340,000 investors were affected.
At that time, Gemini co-founder Tyler Winklevoss called the SEC’s allegations ‘extraordinarily unconvincing’ and ‘a fabricated penalty ticket’.
In the current motion, the firms noted that interpreting the three-party loan agreement on key digital assets (MDALA) between Genesis, Gemini and Earn users as an unregistered security “has no legal or factual basis”.
Lawyers stressed that the SEC failed to ‘properly prove’ that MDALA is an investment contract, and to provide convincing grounds for the claims that the agreements were disseminated to third parties.
In May, Digital Currency Group (DCG), Genesis’ parent company defaulted on a payment of $630 million as part of compensation to Gemini Earn users.
Earlier, DCG, Genesis, the creditors’ committee of the crypto-lending platform and the exchange agreed to launch a 30-day pre-litigation settlement process.
The parties seek an acceptable resolution under the Genesis creditors agreement proposed in February 2023, under which the creditors would recover 80% of the lost funds. The arrangements envisaged a gradual write-down of Genesis’s loan portfolio and the sale of insolvent entities.