SEC started pursuing legal actions against crypto companies that faltered in the last bear market starting from 2023. The crypto lending craze that set the stage for the 2021 bull market contributed to the deepening of the subsequent bear market. The bankruptcy of Genesis, the largest crypto lending debtor, resulted in difficulties for customers of the Gemini exchange.
SEC and Crypto Lawsuit
Gemini and Genesis sought to have the lawsuit filed against them by the SEC dismissed. This request was denied by Judge Edgardo Ramos. The decision given in the Southern District of New York US District Court ruled that the SEC’s allegations against both Genesis and Gemini were reasonable.
The judge referred to the Howey Test, which sets forth a multifactorial test to determine whether an entity falls under the securities laws, and the Reves Test.
“Under both the Howey and Reves frameworks, the SEC has reasonably alleged that the Defendants offered and sold unregistered securities through the Gemini Earn program. As a result, the Defendants’ motions to dismiss the case are DENIED.”
