The US Securities and Exchange Commission (SEC) has formally agreed to dismiss its high-profile enforcement lawsuit against the cryptocurrency exchange Gemini, which was founded by the billionaire twins Tyler and Cameron Winklevoss. This significant legal development occurred on Friday, following the complete return of crypto assets to investors who participated in the Gemini Earn lending programme.
Resolution Through Bankruptcy Process
The SEC and Gemini, now operating under the name Gemini Space Station, filed a joint stipulation in the federal court in Manhattan to dismiss the case. This action was taken after investors in the Gemini Earn programme had their crypto assets returned in full through the Genesis Global Capital bankruptcy process between May and June 2024. The financial regulator had initially decided to resolve the lawsuit last year.
Background of the SEC Charges
In 2023, the SEC charged Genesis Global Capital and Gemini Trust Company with illegally selling securities to hundreds of thousands of investors via their crypto lending product, Gemini Earn. Customers who participated loaned their cryptocurrency to Genesis and were paid interest on these loaned assets. The total value of assets in the Gemini Earn programme was approximately $940 million when Genesis froze customer accounts in November 2022.
Investor Recovery and Settlements
The New York state attorney general also pursued legal action against the company in the wake of the scandal, securing a $50 million settlement aimed at compensating users. Unlike several other cryptocurrency firms that collapsed following the 2022 market crash, Genesis managed to return customers' crypto assets directly rather than liquidating a limited pool of assets for cash repayments. As part of the settlement, Gemini was prohibited from operating a crypto lending programme in New York.
Regulatory Shift Under Trump Administration
The SEC's decision to drop the lawsuit aligns with a broader series of industry-friendly actions taken by the regulatory body in recent years. This represents a notable shift in the SEC's approach to cryptocurrency enforcement under the influence of Donald Trump, who famously pledged to be the "crypto president." His administration has introduced more favourable regulations and actively promoted the mainstream adoption of digital currencies.
Trump's policies have significantly boosted the cryptocurrency sector, reversing the push for stricter financial regulation seen under Joe Biden's administration. Notable actions include the pardon of Binance founder Changpeng Zhao and Trump's own venture into launching a personal cryptocurrency.
SEC's Stated Position
According to the court documents filed on Friday, the SEC stated that after "the 100 percent in-kind return of Gemini Earn investors’ crypto assets through the Genesis Bankruptcy and the settlements ... the Commission believes the dismissal of the claims against Defendant is appropriate." The regulator emphasised that this dismissal does not indicate its position on any other ongoing or future cases.
Gemini's Market Position and Future
Gemini made a strong debut on the Nasdaq stock exchange last year, highlighting the rapid institutional adoption that has renewed investor optimism in digital assets. Current data from LSEG values the exchange at approximately $1.14 billion. The company has not provided an immediate comment regarding the SEC's decision to dismiss the lawsuit.
This resolution marks a pivotal moment for Gemini and the wider cryptocurrency industry, reflecting evolving regulatory landscapes and the complex interplay between innovation, investor protection, and governmental policy.
