Judge Rules Against Gemini, Genesis Motion to Dismiss SEC Case Against Earn Product

A New York judge has ruled that the U.S. Securities and Exchange Commission (SEC) case against crypto lender Genesis and crypto exchange Gemini will be allowed to move forward, denying the two defendants’ motions to dismiss in a Wednesday court filing.

Judge Edgardo Ramos, of the Southern District of New York, found that the regulatory agency’s complaint “plausibly alleges” that the two firms violated securities laws – allegedly offering and selling unregistered securities to retail investors – through the now-defunct Gemini Earn program. A ruling on a motion to dismiss generally has to accept the plaintiff’s facts as true, and doesn’t indicate how the court might ultimately rule on the SEC’s allegations about whether Earn violated securities laws.

Gemini Earn was first available to retail customers in February 2021, offering as much as 8% interest on crypto tokens invested through the program. According to the SEC’s complaint, Gemini Earn had approximately 340,000 retail users and $900 million in assets on its platform when, in November 2022, Genesis halted withdrawals, citing “withdrawal requests which have exceeded our current liquidity.”

Against the backdrop of an escalating and public dispute between the leadership of the two firms, Gemini Earn was shuttered on Jan. 10, 2023. Two days later, the SEC filed charges against both companies. That same month, Genesis filed for bankruptcy.

In May 2023, Gemini and Genesis both filed motions to dismiss the case against them, as well as subsequent alternative motions to strike the SEC’s request for permanent injunctive relief and disgorgement against both firms. Judge Ramos denied each of them, and ruled that the case be allowed to proceed.

The co-founders of Gemini, Tyler and Cameron Winklevoss, have vowed to return 100% of Gemini Earn customers’ funds – worth roughly $1.1 billion – when Genesis’s bankruptcy case ends.