In a decisive legal move, the US Securities and Exchange Commission (SEC) has initiated lawsuits against cryptocurrency organizations struggling since the market’s downturn in 2023. The crypto lending boom of 2021, which sparked a bullish market, played a significant role in the subsequent market slump. Particularly affected was Genesis, the largest debtor in crypto lending, whose bankruptcy has caused substantial issues for Gemini exchange customers.
Judicial Ruling Upholds SEC Claims
Crypto firms Gemini and Genesis recently faced a legal setback when their attempt to dismiss an SEC-filed lawsuit was overruled by Judge Edgardo Ramos. The ruling, emanating from the Southern District of New York’s US District Court, confirmed that the allegations put forth by the SEC held merit and deserved consideration in court.
Application of Howey and Reves Tests
In his assessment, Judge Ramos employed the Howey Test, which considers multiple factors in determining whether a financial arrangement should be subject to securities regulation, as well as the Reves Test. These tests helped establish the grounds for the SEC’s argument.
According to Judge Ramos, both tests reveal that Gemini and Genesis likely engaged in offering and selling securities without proper registration through the Gemini Earn program. Consequently, he concluded that there was sufficient basis to proceed with the case, denying the defense’s motion for dismissal.
