SEC Ends Gemini Earn Case After Full User Fund Recovery

Highlights:

• The SEC dropped its lawsuit against Gemini Earn after more than two years.
• Gemini Earn users fully recovered their assets, returned in kind, not cash.

• Gemini faced no penalties, which marks a rare outcome in crypto regulation.

The US Securities and Exchange Commission closed a major legal chapter involving Gemini Trust Company. The agency formally dropped its lawsuit tied to the failed Gemini Earn program. The case had drawn wide attention since the 2022 crypto market collapse and stayed active for more than two years.

In a joint court filing submitted on Friday, both the regulator and the crypto exchange requested dismissal with prejudice, which prevents any future filing of identical claims. Legal proceedings had been ongoing since January 2023. Gemini operates under twin founders Tyler Winklevoss and Cameron Winklevoss. The dismissal marked a rare ending where no penalties were imposed on the exchange. The decision also closed one of the final crypto enforcement actions launched during earlier regulatory leadership.

Why the Regulator Stepped Back

The SEC described the dismissal as an exercise of discretion. The agency emphasized the full recovery of digital assets by Gemini Earn users. Customers received every asset in kind instead of cash. The filing also referenced earlier state and regulatory settlements linked to the same program.

However, the SEC clearly stated that no shift in enforcement policy followed the decision. The agency stressed the independence of ongoing and future crypto cases. According to the filing, the dismissal does not reflect the SEC’s position in other matters involving lending or yield products. Oversight of similar programs continues under existing rules.

Gemini Earn Collapse and User Losses

Gemini launched the Earn program in February 2021. The product allowed users to earn yield by lending crypto assets through Genesis Global Capital. Gemini served as the platform interface and charged user fees.

Genesis halted withdrawals in November 2022. Market stress followed the FTX collapse and triggered severe liquidity pressure. Genesis failed to meet redemption requests during the crisis. As a result, more than $900 million in user assets became locked. Around 340,000 Gemini Earn users faced losses. Genesis filed for bankruptcy two months later, leaving customers without immediate access to funds.

The SEC filed charges in January 2023 against Gemini and Genesis. The SEC claimed that Gemini and Genesis had been selling unregistered securities to investors. The Earn product had been classified as an investment contract under federal law. Gemini had denied the claims made by the SEC. The reason Gemini gave was that the program had been designed as a lending program.

Gemini also stated that Genesis controlled lending decisions and bore responsibility for losses. Genesis followed a different legal path. The firm later settled with the SEC. Genesis agreed to pay a $21 million civil penalty without admitting or denying wrongdoing.

The dismissal is a sign of a larger change in the approach of the SEC under President Trump. He has indicated that he is in favor of the adoption of crypto and the relaxation of regulations in the industry. The SEC has made it clear that the dismissal only applies to Gemini and not to other crypto cases.