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Cryptocurrency exchange Gemini Trust Co. and bankrupt creditor Genesis Global Capital jointly filed a dismissal of a lawsuit filed by the Securities and Exchange Commission (SEC). The lawsuit alleges that their Earn product violated securities regulations by offering unregistered securities.
In their legal documents, the companies argued that their Earn product, which facilitated the lending of coins for income, should not be classified as a security. Genesis also argued that the transactions were, in fact, loans and asked the court to dismiss the complaint or, alternatively, strike down the SEC’s demands for a permanent injunction and indemnification.
In addition, the statement stated that Gemini, not Genesis, was responsible for the customer-facing aspects of the Earn program. Gemini, which has claimed its role as Earn’s transfer agent, criticized the SEC lawsuit as “ill-conceived” in its blog update directed at Earn users.
Following an SEC lawsuit in January, Genesis subsequently filed for bankruptcy, leaving Earn users facing withdrawal limits from mid-November. In response, Gemini filed a comprehensive lawsuit on Monday, May 22, seeking to recover more than $1.1 billion in assets in favor of Earn’s 232,000 users.
Gemini, Genesis and its parent Digital Currency Group are in mediation talks this month in an attempt to reach a restructuring and settlement agreement. The February pre-deal is still pending, and earlier this month, DCG defaulted on a $630 million loan to Genesis.
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During this month, Gemini, Genesis and its parent company Digital Currency Group (DCG) have been in mediation talks to reach a restructuring and settlement agreement. Although a tentative deal was proposed in February, it was never formally closed. In addition, earlier this month, DCG defaulted on a $630 million loan to Genesis.
At the same time, Gemini and other lenders are collaborating on an “amended reorganization plan” that can be implemented independently if the mediation process fails. The goal is to provide an optimal experience for Earn users, as stated by the exchange in their blog post.