Cryptocurrency exchange Gemini and bankrupt crypto lender Genesis Global Capital have jointly filed for dismissal of a Securities and Exchange Commission (SEC) lawsuit. The lawsuit claims that “Gemini Earn,” which allows customers to lend crypto assets such as Bitcoin (BTC) to Genesis, with Gemini charging a fee of up to 4.29%, violated securities regulations by offering unregistered securities.

The companies’ legal documents maintain that Gemini Earn should not be classified as a security. Genesis argued that the transactions were essentially loans and asked the court to dismiss the lawsuit or, alternatively, quash the SEC’s requests for a permanent injunction and return.

Furthermore, the indictment claimed that Gemini, and not Genesis, was responsible for the customer-facing aspects of the Earn program. Gemini, which has stated her role as Earn’s transfer agent, slammed the SEC’s lawsuit as “ill-conceived” in a blog update aimed at Earn users.

Following the SEC lawsuit in January, Genesis filed for bankruptcy, leading Earn users to face withdrawal restrictions from mid-November 2022. In response, Gemini filed a comprehensive claim on Monday, May 22, with the goal of recovering more than $1.1 billion in assets by 232,000 Earn users.

The parent company of Gemini and Genesis, Digital Currency Group (DCG), is in mediated negotiations to develop a restructuring and liquidation agreement. A preliminary February deal has not been finalized, and earlier this month, DCG defaulted on a $630 million loan to Genesis.

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At the same time, Gemini and other creditors are collaborating on an “amended plan of reorganization” that can be carried out independently if the mediation process fails. The goal is to ensure the optimal result for Earn users, as stated by the exchange in their blog post.

in a cheepJack Baughman, a founding partner at JFB Legal who is handling the case, said the SEC case only makes it more difficult and complicated to recover Genesis bankruptcy assets and win back Earn users. It does nothing to speed up the process and unlock assets that need to be returned to Earn users.

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