Cryptocurrency exchange Gemini has filed a reply brief as part of its effort to dismiss the lawsuit it is facing against the United States Securities and Exchange Commission (SEC).
The lawsuit alleges that “Gemini Earn” – a service enabling customers to lend crypto assets like Bitcoin (BTC) to Genesis – breached securities regulations by offering unregistered securities.
According to Aug. 18 court documents, filed in the U.S District Court for the Southern District of New York, Gemini has argued that the SEC has failed to state a claim.
“Section 5 of the securities act is not hard to understand” the filing stated, while arguing that the SEC has not clearly pointed out the requirements for claiming a violation of the act:
“The fact that the SEC cannot decide what is the security at issue only underscores the weakness of its position.”
It further argued that the court shouldn’t tackle the “convoluted analyses” presented by the SEC, but rather pose straightforward questions to determine if it qualifies as a security or not.
It prompted questions including: When was the alleged security sold? Who was the buyer? Who was the seller? What price was offered or charged?
Gemini also contended that the SEC needs to pinpoint the unregistered security first, and then identify the sale or the offer to sell that security. Gemini claimed that the SEC has failed to fulfill this requirement.
“However, the SEC has not met that burden, and its opposition avoids the question before the court,” the filing stated.
Related: SEC lawsuits: 68 cryptocurrencies are now seen as securities by the SEC
On May 27, Gemini argued in a court filing that transactions carried out within the Gemini Earn program were essentially loans, and for the SEC to dismiss the complaint.
On Aug. 19, Jack Baugham, a founding partner of JFB Legal, which represents Gemini, made a statement on X (formerly Twitter), suggesting that the SEC is changing its argument as the lawsuit goes on.
“The SEC is floundering. They can’t even decide what the security is,” Baugham stated, noting the confusing nature of its argument:
“On the one hand, they claim that the Loan Agreement was a security. On the other hand, they claim that the entire Gemini Earn program was itself a security — an argument absurd on its face.”
Magazine: Deposit risk: What do crypto exchanges really do with your money?
The Federal Court of Australia has sided with fintech firm Block Earner in an appeal against a ruling that found it was required to hold a financial services license for its now-discontinued crypto-related products. Block Earner’s crypto-linked fixed-yield earning product is not a financial product, or a managed investment scheme, and is not a derivative under the Corporations Act, Justices David O’Callaghan, Wendy Abraham and Catherine Button said in an April 22 judgment. The trio said Block Earner’s yield product couldn’t be classed as an investment or financial product because users loaned crypto under fixed terms for interest payments and didn’t pool contributions to generate further benefits. The terms and conditions framed it as a loan, and users had no exposure to the firm’s business outside of the agreed interest rate, they added. The Australian Securities and Investment Commission (ASIC), which first brought the case, has been ordered by the court to pay costs for the proceedings, including appeals. The regulator said in an April 22 press release that it is currently “considering this decision.” Block Earner’s chief commercial officer, James Coombes, told Cointelegraph the court decision brings clarity that crypto assets shouldn’t be treated differently from other asset classes when applying existing laws. “Our product was simply defined as one where customers would lend their assets to us for a fixed return, there was no share in the upside of the pool of assets and as such no Managed Investment Scheme existed,” he said. “The fact that it included crypto assets should not alter that simple definition, and I believe this case forms a bedrock for ambitious brands around Australia to build from.” An ASIC spokesperson declined further comment. Despite the win in court, Block Earner will not be reviving its Earner product after axing it when legal proceedings began, but Coombes said that “crypto-backed loans products remain the core focus of the company.” “Regulation going forward is not an easy task, and we empathise with the regulators on this point,” Coombes added. “We hope a collaborative process can bring about positive change.” Related: Australia outlines crypto regulation plan, promises action on debanking ASIC launched civil legal proceedings in November 2022, arguing that Block Earner needed an Australian Financial Services License to offer its three crypto-linked fixed-yield earning products. In February 2024, an Australian court initially found the fintech firm would need a financial services license to operate its crypto yield-bearing products. Another June 2024 ruling released Block Earner from any financial penalties because it had “acted honestly” and pursued its legal opinions before launching the products, which ASIC appealed. Magazine: SEC’s U-turn on crypto leaves key questions unanswered
Former SEC Chair Jay Clayton confirmed that he has been appointed as the interim US Attorney for the Southern District of New York after the Democratic Party’s Senate leader used a “blue slip” to block a vote confirming Clayton’s position. The appointment comes a little over five months after US President Donald Trump nominated Clayton to take on the role. He replaces Damian Williams, who played a major role in the conviction of former FTX CEO Sam Bankman-Fried and other high-profile crypto cases. Clayton said on April 22 his top priorities would be to protect public safety, ensure the integrity of the US financial system, defend national security interests and combat fraud, particularly against the elderly and most vulnerable. The temporary nature of Clayton’s appointment resulted from Democrat Senate Minority Leader Chuck Schumer’s use of a blue slip to block Clayton’s confirmation on April 16, effectively preventing a Senate vote and official confirmation of his position. Blue slips can be used by senators to block US attorney or district court judicial nominees in their home states. Clayton is allowed to serve as interim US attorney for up to 120 days without Senate confirmation. After that, he will need to be approved in a Senate vote or receive a temporary extension of his interim status from Manhattan’s federal court. Trump criticized Schumer’s move in an April 17 Truth Social post, pointing out that Clayton received bipartisan support in the Senate and that Clayton complied with all requests asked of him. The interim status of Clayton’s position will last until around Aug. 20. The role will see him as the top law enforcement officer for New York’s Southern District, encompassing the counties of New York, Bronx, Westchester, Rockland, Putnam, Orange, Dutchess and Sullivan. The Southern District of New York is the oldest federal court district in the US, and its location in the country’s financial epicenter means it often handles high-profile cases involving white-collar crime. Clayton served as SEC chair between May 4, 2017, and Dec. 23, 2020, and brought 56 cases against crypto firms during his tenure. Related: Oregon AG lawsuit against Coinbase calls XRP unregistered security He stated in a December 2021 CNBC interview that he’s a “huge believer in crypto technology,” adding that “the efficiency benefits in the financial system and otherwise from tokenization are immense.” Clayton has also praised Bitcoin (BTC) as a prominent store of value, but didn’t allow Bitcoin exchange-traded products during his time as SEC chair. The first US Bitcoin investment product was approved in 2021 under former SEC Chair Gary Gensler. Magazine: XRP win leaves Ripple and industry with no crypto legal precedent set
A lawyer representing one of the co-founders of crypto mining service Hashflare has addressed how their criminal case may move forward after the pair received “self-deport” letters from the US Department of Homeland Security (DHS). In an April 11 filing in the US District Court for the Western District of Washington, Hashflare co-founders Sergei Potapenko and Ivan Turogin reported they had received a DHS letter directing them to “leave the United States” as part of a push by the Trump administration to effect mass deportations. The government letter contradicted orders from Judge Robert Lasnik, who restricted travel for Potapenko and Turogin as part of their bail conditions. In February, the Estonian nationals pleaded guilty to conspiracy to commit wire fraud as part of a deal with authorities. Between 2015 and 2019, the two were responsible for defrauding Hashflare users out of more than $550 million. They also raised $25 million from investors in 2017, claiming they would establish a digital bank called Polybius. The firm was never created. Indicted in October 2022, Potapenko and Turogin were arrested and held in Estonia before their extradition to the US in May 2024. Both have been free on bail since July 2024 but could face up to 20 years in prison each at sentencing. “[Potapenko and Turogin each] got letters from DHS to their personal email saying ‘deport immediately,’” Reed Smith partner and defense counsel Mark Bini told Cointelegraph. “It caused some angst because [our client and his co-defendant], their conditions of release include that they comply with the law. And here you have this letter saying if you stay in the country, you’re breaking the law. And of course, their bail conditions say they can’t leave the Seattle area.” Related: Russian Gotbit founder strikes $23M plea deal with US prosecutors The DHS letters ordering certain people to “depart the United States immediately” were reportedly sent to thousands of immigrants who had used the government’s CBP One app to enter the country legally. However, some citizens reported receiving the same letter in US President Donald Trump’s attempts to effect deportations through his office. Bini initially thought it was a possibility that the US government was suggesting that Potapenko or Turogin “self-deport” to Estonia after the Justice Department issued a memo hinting it would change its enforcement policy in criminal cases involving crypto. The Hashflare co-founders had been expected to remain in the jurisdiction until at least Aug. 14 for their sentencing hearings. “I have not encountered this situation before, where you have essentially two folks in the federal government telling you conflicting things,” said Bini. The attorney added that Potapenko or Turogin now carried letters with them at all times that stated DHS had deferred action on their “self-deportation” for one year in the event that authorities mistakenly tried to detain them and remove them from the country. Though the pair could still receive prison time, Potapenko, Turogin and Hashflare reported returning $400 million in crypto payments to users and “agreed to forfeit their interests in assets that the government froze in 2022.” “We’re going to try and convince the judge to frankly side with DHS and let them self-deport to Estonia to their families because we believe that there was no actual financial harm to the customers of Hashflare,” said Bini. “It’s a weird [case] because for our clients, we want to be deported. Our clients are Estonian. Their families are Estonian.” Magazine: XRP win leaves Ripple and industry with no crypto legal precedent set
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Earner product won’t make a return
Clayton has shared mostly positive views on crypto
Ordered to leave, forced to stay
