SEC Drops Enforcement Case Against Gemini Trust Following Victim Repayments

The U.S. Securities and Exchange Commission has dismissed its enforcement case against cryptocurrency exchange Gemini Trust, according to court filings. The case stemmed from Gemini's failed Earn program, which collapsed in 2022 after lending partner Genesis Global Capital suspended withdrawals.

What Happened

Gemini Earn allowed users to lend crypto assets to Genesis in exchange for interest payments. When Genesis filed for bankruptcy in January 2023, approximately 340,000 Earn users lost access to $900 million in assets. The SEC subsequently sued Gemini in January 2024, alleging the Earn program constituted an unregistered securities offering.

Why the Case Was Dropped

In its dismissal filing, the SEC noted that victims had since been made whole through bankruptcy proceedings and a separate $1.1 billion settlement with the New York Attorney General's office. This settlement required Genesis to return all remaining assets to Earn users. Since investors ultimately recovered their funds through these parallel actions, the SEC deemed continued litigation "not the best use of Commission resources."

Technical Nuances

This dismissal doesn't absolve Gemini of regulatory scrutiny:

• The SEC maintains its ongoing case against Genesis Global Capital
• Gemini still faces a class-action lawsuit alleging misleading marketing of Earn
• New York regulators continue investigating Gemini's compliance practices

The outcome highlights how bankruptcy proceedings can indirectly resolve regulatory actions when customer funds are returned. However, the SEC's original complaint established that:

1. Earn's interest-bearing accounts qualified as securities under the Howey Test
2. Gemini failed to register the offering despite clear regulatory guidance

Political Context

Gemini founders Cameron and Tyler Winklevoss are prominent Republican donors, contributing $4.9 million to Trump-affiliated groups in the 2024 election cycle. While the dismissal timing coincides with election season, legal experts note the SEC's reasoning appears technically sound given the victim reimbursement. The agency has recently dropped several crypto cases where investors recovered assets.

Industry Implications

The resolution demonstrates regulators' pragmatic approach when investor restitution occurs through alternative mechanisms. However, it leaves unanswered questions about platforms' obligations for yield-bearing crypto products. The SEC continues pursuing cases against other lending platforms where customers weren't made whole.

Court documents: SEC Dismissal Filing New York AG settlement: Genesis Settlement Terms