The U.S. Securities and Exchange Commission (SEC) agreed to dismiss a lawsuit against crypto exchange Gemini on Friday, tied to the company’s defunct Earn product, saying the suit was no longer warranted.
The SEC sued Gemini and Genesis Global Capital in 2023, alleging the companies had sold unregistered securities in the form of Gemini’s yield-bearing Earn product. Investors had entrusted their funds to Gemini, which had loaned them to Genesis, which halted withdrawals after the 2022 FTX collapse and the broader crypto market downturn, the SEC said in its lawsuit.
The SEC halted the lawsuit in April of last year, after Acting Chairman Mark Uyeda had taken over the regulatory agency.
In a court filing Friday, the SEC and Gemini agreed to a joint stipulation — meaning agreement — finding that Gemini had already repaid its investors 100% of their funds through Genesis’ bankruptcy process. A federal judge still needs to sign off on the move.
“The 100 percent in-kind return of Gemini Earn investors’ crypto assets through the Genesis Bankruptcy and the settlements noted above, and in the exercise of its discretion, the Commission believes the dismissal of the claims against Defendant is appropriate,” the filing said.
The lawsuit had previously survived a motion to dismiss, after a federal judge ruled that the agency had “plausibly allege[d]” that there were securities law violations.
Friday’s filing noted that Genesis had already settled with the SEC, agreeing to pay a $21 million fine, and Gemini had settled with New York state regulators.
The case joins more than a dozen other lawsuits the SEC has dropped over the last year, most of which were filed during the presidency of former President Joe Biden and under the watch of former SEC Chair Gary Gensler.
Current SEC Chair Paul Atkins said last November that the regulator would publish guidelines for crypto companies to use in determining whether their products are securities. The same question is at the heart of ongoing debates around legislation before the Senate, which is working on bills that aim to clearly lay out how the SEC can oversee crypto markets.