US SEC drops lawsuit over Gemini’s ‘Earn’ program…reflecting full recovery of investor funds

The US Securities and Exchange Commission (SEC) has decided to drop its lawsuit against cryptocurrency exchange Gemini over its “Earn” product. A key factor behind the decision was that investors have recovered their funds in full.

According to CoinDesk on the 23rd (local time), the SEC said in a court filing that it intends to dismiss the case against Gemini. The agency explained that, because Gemini Earn investors have recovered 100% of their assets through the bankruptcy proceedings of Genesis Global Capital, it determined there was little practical benefit in continuing the litigation. The decision still requires final approval by a federal court.

The SEC sued Gemini and Genesis in 2023, alleging that the Gemini Earn program constituted an unregistered securities offering. Investors deposited funds through Gemini, which in turn lent them to Genesis. Problems surfaced after Genesis halted withdrawals in 2022 in the wake of FTX’s collapse and the broader downturn in crypto markets.

Proceedings in the case were previously paused in April last year under then-acting SEC chair Mark Uyeda. In the latest court filing, the SEC said, “In light of the return of 100% of in-kind assets to Gemini Earn investors through the Genesis bankruptcy process and related settlements, the Commission has determined, in its discretion, that dismissal is appropriate.”

Earlier, a federal judge rejected Gemini’s motion to dismiss, finding the SEC’s claims sufficiently persuasive. Genesis later reached a settlement with the SEC and agreed to pay a $21 million penalty, while Gemini separately concluded an agreement with New York state regulators.

The dismissal is one of more than 10 crypto-related cases the SEC has dropped over the past year. Most of those cases were brought during former President Joe Biden’s tenure and under former SEC Chair Gary Gensler.

Current SEC Chair Paul Atkins previously said in November last year that the agency would present new guidelines to help crypto companies determine whether their products qualify as securities. Such standards are also a key issue in the crypto market structure bill currently under discussion in the US Senate.