SEC Drops Crypto Lending Lawsuit Against Gemini

The US Securities and Exchange Commission (SEC) has officially dropped its civil lawsuit against Gemini Trust Company, a major relief for the crypto exchange’s founders, Tyler and Cameron Winklevoss, following the recovery of investors’ assets in full.

The SEC had sued Gemini and Genesis Global Capital in 2023, alleging the companies had sold unregistered securities in the form of Gemini’s yield-bearing Earn product.

Traders on the exchange have entrusted their funds to Gemini, which then lent them to Genesis, which halted withdrawals after the 2022 FTX collapse and the broader crypto market downturn.

Withdrawals were frozen, leaving around $900 million in crypto assets belonging to nearly 340,000 users locked and inaccessible.

To help resolve the situation, Gemini later contributed about $40 million in Bitcoin and $10 million in other assets, and also paid a $37 million penalty as part of a separate settlement with New York regulators. 

SEC Drops Gemini Earn Lawsuits

However, in the latest filing, Gemini and the SEC submitted a joint stipulation in federal court in Manhattan to dismiss the case, citing the complete return of crypto assets to Gemini Earn investors through the Genesis Global Capital bankruptcy, which occurred between May and June 2024.

The SEC and Gemini agreed to a joint agreement finding that Gemini had already repaid its investors 100% of their funds through Genesis’ bankruptcy process. A federal judge still needs to sign off on the move.

“The 100 percent in-kind return of Gemini Earn investors’ crypto assets through the Genesis Bankruptcy and the settlements noted above, and in the exercise of its discretion, the Commission believes the dismissal of the claims against Defendant is appropriate,” the filing said.

By returning users’ crypto in full, the SEC noted that investor harm was significantly reduced.

The case joins more than a dozen other lawsuits the SEC has dropped over the last year, most of which were filed during the presidency of former President Joe Biden and under the watch of former SEC Chair Gary Gensler.