SEC files enforcement action against Winklevoss-founded crypto exchange Gemini
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The US Securities and Exchange Commission has agreed to dismiss an enforcement case against Gemini, the cryptocurrency exchange founded by billionaire twins Tyler and Cameron Winklevoss, after investors in the discontinued loan program fully recovered their crypto assets.
Key Takeaways:
The SEC dropped the case after Gemini Earn investors were fully paid in crypto.
Payments are due in mid-2024 through Genesis bankruptcy proceedings.
The decision is based on a 100% return in kind of the client's assets.
In a joint filing filed Friday in federal court in Manhattan, the SEC and Gemini Space Station cited the full payment of assets to Gemini Income Program beneficiaries in Genesis Global Capital's bankruptcy proceeding.
According to court documents, the payments were made between May and June 2024.
The SEC will drop the Gemini bond after the income investors have fully processed
The regulator's decision followed a “100 percent return in kind” of crypto assets to affected investors, meaning that customers received the digital assets they originally deposited instead of cash equivalents.
Based on that result, the SEC concluded that it was appropriate to dismiss the claims against Gemini.
The case stems from a lawsuit filed in January 2023 in which the SEC accused Gemini Trust Company and Genesis Global Capital of offering unregistered securities through the Gemini Income program.
Under the arrangement, Gemini users loaned their crypto to Genesis to get their product.
At its peak, Gemini's revenue program held approximately $940 million in client assets.
That balance was left in November 2022 when Genesis stopped issuing funds amid widespread market turmoil following the collapse of several major crypto companies.
Genesis later filed for bankruptcy, prompting months of negotiations between creditors, regulators and creditors.
Unlike many firms that collapsed during the 2022 crypto crash, Genesis eventually returned client assets instead of liquidating holdings and distributing cash proceeds.
That result played a central role in the SEC's decision to drop its charges against Gemini.
As crypto policy softens and exchanges grow, the SEC will drop the Gemini case
The dismissal comes amid sweeping changes to the SEC's handling of digital assets under US President Donald Trump.
The administration has shown a more favorable stance towards the crypto sector, with Trump publicly pledging to primarily support the adoption of digital assets and ease the regulatory burden on the industry.
In the filing, the SEC emphasized that the dismissal does not reflect its position on other crypto-related enforcement actions, emphasizing that the decision is limited to the Gemini case.
The exchange continues to expand its institutional footprint following the resolution of the dispute.
Gemini has been high-profile on the Nasdaq over the past year, reflecting renewed investor interest in crypto platforms as the market recovers. According to LSEG data, the company is currently worth approximately $1.14 billion.
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