Gemini says SEC case should be dismissed, calls claims ridiculous
Gemini’s legal counsel have said that the Securities and Exchange Commission (SEC) claims against the crypto exchange are ridiculous. The exchange is urging a federal judge to throw out the SEC lawsuit filed in January.
Gemini ask court to throw out SEC’s case
The third largest exchange by trading volume in the US, Gemini, has asked a federal judge to dismiss the case filed against it by the SEC. The exchange argued that the regulator did not establish a clear case that the company was selling unregistered securities.
According to a 15-page filing on Friday, Gemini’s legal team said that the SEC cannot substantiate its claims in court.
“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,” wrote the Gemini lawyers.
The SEC filed a suit against the Winklevoss twins’ exchange in January. It alleges that Gemini’s introduction of the Gemini Earn program, which allows users to lend digital assets to Genesis under certain terms constituted the unlawful sale of unregistered securities.
The legal team said that under Section 5 of the Securities Act, two requirements must be met for a sale of unregistered securities to be illegal—“There must be a security; and The defendant must have sold, or offered to sell, ‘such security.’”
“Thus, to make out its case, the SEC must do two things,” they argued. “First, it must identify the unregistered security. Second, after it has identified such security, it must identify the sale or the offer to sell.”
Gemini’s lawyer calls claims ridiculous
Jack Baughman, the lawyer representing Gemini wrote in a series of tweets on X that the SEC’s definition of the word “sale” has not been clearly outlined. He noted that the regulator resorted to broad claims that the crypto exchange “sold” their promise to pay interest in exchange for crypto assets.
Baughman wrote: “Not only is this factually wrong, it is ridiculous. A sale and a loan are different things. At some point words must mean something.”
The lawyers were more blunt on the Gemini Earn issue. They noted that earning interest on invested tokens did not amount to a securities sale, but just borrowed assets that could be returned on demand.
Hence they said, “with all respect, this is frivolous,” they wrote. “The assertion, besides being untethered from the facts alleged in the complaint, bears no relation to reality.”
Baughman didn’t hold back. He added that government entities rarely take extreme positions in legal disputes. Citing that the court will normally give regulators more reverence on unconventional stances because of the position they hold interpreting the statutes they administer.
He concluded that regulatory bodies should be more considerate, including to those they litigate against. He noted concerns about regulators in the US just pursuing cases without restraint.
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