The United States 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, marking a notable conclusion to a case that had drawn considerable attention within the financial and digital asset sectors.
Background of the SEC Case Against Gemini
The SEC initially charged Gemini Trust Company and its partner Genesis Global Capital in 2023, alleging that they had been illegally selling securities to hundreds of thousands of investors through their crypto lending program, known as Gemini Earn. Under this program, Gemini customers loaned their cryptocurrency assets to Genesis in exchange for interest payments. The total value of assets involved in the Gemini Earn program was reported to be approximately $940 million at the time Genesis froze customer accounts in November 2022, amid a broader market downturn in the cryptocurrency industry.
Resolution Through Bankruptcy and Settlements
The dismissal of the lawsuit follows the complete return of crypto assets to Gemini Earn investors, which was achieved through the Genesis Global Capital bankruptcy process between May and June 2024. In a joint stipulation filed in federal court in Manhattan, the SEC and Gemini, now rebranded as Gemini Space Station, cited this full restitution as the primary reason for dropping the case. According to court documents, 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."
This outcome is somewhat unique in the crypto space, as Genesis managed to return customers' cryptocurrency directly rather than liquidating assets and providing cash repayments, which has been common in other bankruptcy cases following the 2022 market crash. Additionally, the New York state attorney general pursued legal action against Gemini, resulting in a $50 million settlement that contributed to making affected users whole. As part of this settlement, Gemini was banned from operating a crypto lending program in New York.
Broader Regulatory Shifts Under the Trump Administration
The SEC's decision to drop the lawsuit against Gemini aligns with a series of industry-friendly actions taken by the regulatory body in recent years, a shift that has been particularly pronounced under the administration of former President Donald Trump. Trump, who has positioned himself as a "crypto president," has implemented more favorable rules and pledged to promote the mainstream adoption of digital currencies. His administration has actively boosted the cryptocurrency industry, reversing efforts by the previous Biden administration to enforce stricter financial regulations.
Notably, Trump has pardoned Binance founder Changpeng Zhao and even launched his own cryptocurrency, further underscoring his supportive stance. The SEC emphasized in its court filing that its decision to seek dismissal in this specific case does not reflect its position on any other enforcement matters, indicating a cautious approach to broader regulatory implications.
Gemini's Market Position and Future Prospects
Despite the legal challenges, Gemini has demonstrated resilience and growth in the cryptocurrency market. Last year, the exchange made a strong debut on Nasdaq, highlighting the rapid institutional adoption that has renewed investor optimism for digital assets. According to data provided by LSEG, Gemini is currently valued at approximately $1.14 billion, underscoring its significant presence in the industry.
The resolution of the SEC lawsuit removes a major legal overhang for the Winklevoss twins' firm, potentially paving the way for further expansion and innovation. As the regulatory landscape continues to evolve, this case serves as a key example of how crypto companies are navigating legal complexities and working towards compliance in an increasingly scrutinized environment.
