On Wednesday, US District Judge Edgardo Ramos in New York refused the SEC's motion to dismiss the January 2023 civil claims. In addition to civil fines and a restraining order prohibiting Gemini and Genesis from selling unregistered securities, the government is also requesting that the companies forfeit any funds they may have unlawfully obtained through the operation.
Customers were able to lend their cryptocurrencies and earn interest through Earn. According to the defendants, US law does not consider the transactions to be securities because they are loan arrangements.
Customers were investing in a common company and had a reasonable prospect of profit, according to Ramos. This means that Earn passed the US Supreme Court's standard for a security, as stated in the SEC's lawsuit.
The judge concluded that the SEC "plausibly alleges that defendants offered and sold unregistered securities through the Gemini Earn program."
various courts have arrived at various results when using the same criteria to the question of whether digital assets constitute securities.
Genesis promptly declared bankruptcy following the SEC's legal action. The Winklevoss twins' cryptocurrency exchange, Gemini Trust Co., settled with New York last month, agreeing to return consumers a minimum of $1.1 billion through the Genesis bankruptcy.
Following Wednesday's decision, all parties are free to continue collecting evidence in preparation for trial. Following the exchange of records and the taking of pretrial deposition testimony from witnesses, the firms may make another attempt to have the lawsuit dismissed.
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