Gemini, the cryptocurrency exchange owned by Cameron and Tyler Winklevoss, has taken steps to challenge the allegations brought by the United States Securities and Exchange Commission (SEC). This move comes in response to the SEC’s accusations that Gemini’s service, Gemini Earn, violated securities regulations by offering unregistered securities.
Gemini has filed a reply brief in the U.S. District Court for the Southern District of New York, where it argues that the SEC has not submitted a clear claim in its lawsuit. The exchange said that the court should simplify the matter by posing direct questions to determine whether Gemini Earn qualifies as a security. These questions include identifying the alleged security’s sale date, buyer, seller, and price.
Furthermore, Gemini claims that the SEC should first identify the unregistered security and then establish the sale or offer to sell that security. The exchange further states that the SEC has not met this requirement in its complaint.
“Even assuming for the sake of argument that SEC has somehow described a security (under either of its inconsistent theories), it has not plausibly alleged that such security was ever sold or offered for sale,” reads the 15-page motion,” the legal notice reads.
The legal dispute began when the SEC accused Gemini of offering unregistered securities through Gemini Earn. The exchange’s reply brief seeks to challenge the SEC’s arguments and highlight the lack of clarity and proof in the regulatory body’s claims.
Regardless of the lawsuit’s outcome, it seems Gemini won’t be returning to the United States any time soon. The exchange confirmed its exit from the country in April, alongside several other industry players.
Gemini is being sued by investors over the sale of its interest-bearing crypto products. In a class-action complaint filed in the U.S. District Court for the Southern District of New York, some investors accused Gemini and its founders of fraud and violations of the Exchange Act.
The complaint alleges that Gemini’s Earn program didn’t register its high-yield products as securities in accordance with U.S. securities law. The filing highlights that the exchange promoted annual interest rates of up to 7.4% on crypto deposits, which was higher than rates for short-term, investment-grade, fixed-income securities or bank savings accounts.
Gemini customers said that the exchange failed to distinguish the FDIC status of its own bank deposits and customers’ high-yield program. In other words, those statements implied that FDIC insurance was available for Gemini Dollar (GUSD) holdings, while the agency does not insure brokerage accounts.
The Earn accounts were frozen after its main lending partner, Genesis Global Capital, enacted a similar freeze before going bankrupt.
