Court rules SEC’s lawsuit against Gemini and Genesis remains valid with plausible claims.

A federal judge has ruled that the United States Securities and Exchange Commission’s (SEC) allegation against crypto firms Gemini and Genesis is plausible enough to proceed with the lawsuit. In a 32-page order on March 13, Judge Edgardo Ramos of the New York District Court rejected the motions to dismiss the SEC’s lawsuit. The judge also denied a separate request to stop the SEC from ordering the firms to cease selling securities and to hand over profits from the Gemini Earn program if the SEC wins the case. According to Judge Ramos, the SEC’s suit filed in January 2023 “plausibly alleges” that Gemini Earn, a crypto yield-bearing product managed by Genesis and offered by Gemini, sold unregistered securities. The SEC’s allegations that the Gemini Earn agreements were notes, a debt security obligating loan repayments with interest, also stood. However, the ruling does not guarantee a favorable outcome for the SEC, as the regulator still needs to prove its case. Both parties will now proceed with gathering evidence. In a related development, Genesis recently reached a settlement with the SEC for $21 million. Gemini Earn had approximately 340,000 customers and $900 million in assets under management in November 2022, according to the SEC’s suit. Genesis filed for bankruptcy after the SEC’s lawsuit in January last year, and Gemini agreed to return $1.1 billion to Gemini Earn customers through the Genesis bankruptcy proceeding in a settlement with New York’s financial regulator in February.