NEW YORK — After nearly three years embroiled in legal disputes, cryptocurrency exchange Gemini Trust has reached a preliminary agreement with the U.S. Securities and Exchange Commission to settle a lawsuit concerning its Earn program.
The investigation centered on Gemini’s now-defunct Earn program, which was recognized as a significant element in the SEC’s overall effort to regulate digital assets. This crypto lending product, which launched in 2021, promised retail investors up to 7.4% annual returns on Bitcoin and other cryptocurrency deposits.
Attorneys representing both Gemini and the SEC submitted a joint letter in Manhattan federal court on Monday, announcing a “resolution in principle” that they expect will resolve the lawsuit. However, the settlement still relies on final approval from the SEC. Both parties have requested that the court postpone all deadlines until December 15, allowing time for potential finalization of the agreement.
The lawsuit, initiated in January 2023, accused Gemini and its partner Genesis Global Capital of engaging in the illegal sale of unregistered securities through the Earn program. The program, at its highest point, managed approximately $900 million across 340,000 accounts.
The enforcement of this lawsuit was in line with the aggressive strategies adopted by former SEC Chair Gary Gensler, who maintained that most cryptocurrencies and yield-bearing services should adhere to existing securities regulations. Programs like Gemini’s Earn and Kraken’s staking service became focal points in the enforcement-heavy approach to cryptocurrency regulation under Gensler’s leadership.
However, the regulatory landscape has shifted as leadership changed within the SEC. The agency has since reduced its focus on enforcement-first tactics, showing a greater willingness to pursue comprehensive legislation rather than relentless litigation. The SEC’s decision to settle with Gemini marks a significant shift towards regulatory collaboration with cryptocurrency platforms.
As part of its restructuring, Gemini has committed to returning approximately $1.1 billion to participants in the Earn program, contingent upon the conclusion of Genesis’s ongoing bankruptcy process.
While this settlement brings a long-sought resolution for investors affected by the collapse of the Earn program, it also serves as a reminder of the inherent risks associated with yield-bearing cryptocurrency products. These products have faced increased regulatory scrutiny, especially following the market downturn experienced in 2022.
This situation highlights the evolving dynamics in the cryptocurrency regulatory environment, which continues to develop as both the market and legislative priorities transform.
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