SEC Drops Gemini Earn Case After $940M Repayment, Closing One of Crypto’s Longest Legal Battles

Key Takeaways:

• The SEC has also agreed to permanently withdraw its case associated with the Earn lending program of Gemini.
• Gemini Earn users recovered their entire crypto as part of Genesis bankruptcy.
• The move will mark a change because American regulators review old crypto enforcement cases.

One of the most highly monitored crypto enforcement matters of the post-FTX period, a formal effort by the U.S. Securities and Exchange Commission to terminate it. The regulator also agreed to abandon its civil case against Gemini on the collapsed Gemini Earn scheme on the basis of complete repayment of investors.

Documented filings in court reveal that the SEC and Gemini have agreed unanimously to dispose of the case “with prejudice” implying the allegations cannot be reinstated once a federal judge sanctions the motion. The case was initially filed in January 2023 and alleged that Gemini and its lending partner, Genesis Global Capital, sold unregistered securities under the Earn product.

Genesis was loaning crypto assets to users lent to it under Gemini Earn. In late 2022, that model collapsed as Genesis withdrew after the general stress on markets after the collapse of FTX. At the time, nearly $940 million in customer assets were locked.

The SEC’s latest filing makes clear why the agency is stepping back. Through Genesis’ bankruptcy proceedings, Gemini Earn customers received a 100% in-kind return of their digital assets between May and June 2024. Gemini also committed up to $40 million to help close any remaining recovery gaps.

With investors made whole, the regulator said continuing the case was no longer appropriate.

Read More: Superstate Secures 82.5 Million to Move SEC-Registered Equity Issuance to Blockchains

Genesis had already resolved its own dispute with the SEC earlier, agreeing to pay a $21 million civil penalty. That settlement eliminated one of the key barriers to litigation, and reduced the case to Gemini itself.

After Genesis made asset allocations and settlements had been made, the SEC stopped the suit in April 2024 in essence. The new filing transforms that stay into a complete dismissal of a case which had withstood a prior motion to dismiss in federal court.

The lawsuit against Earn was one in an overall crackdown on crypto lending, crypto yield and crypto staking products in the 2022-2023 period. The regulators claimed that such programs were similar to securities offerings in which they were not supposed to be disclosed and had no investor protection.

It is sacked during a broader redefinition of U.S. crypto regulation. Over the past year, SEC canceled or scaled back over dozen crypto-related enforcement actions launched by the prevous administration.

SEC current leadership signaled plans for clearer guidance on when digital asset products qualify as securities. At the same time, Congress continues to debate market structure bills to identify the regulatory boundaries between SEC and CFTC.

Read More: SEC, CFTC Host Joint Crypto Harmonization Event as U.S. Pushes Regulatory Clarity

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