Investigation into Gemini's two-year-old legal proceedings with the SEC concludes with an agreed resolution.
In a significant development, crypto exchange Gemini and the U.S. Securities and Exchange Commission (SEC) have reached a 'resolution in principle' to end a high-profile enforcement action over Gemini's lending program. This potential agreement, if accepted by the Commission, could result in the suspension of active litigation.
The case centres on whether Gemini Earn, a yield-bearing service tied to Genesis, constituted an unregistered securities offering. The litigation has stretched across multiple bankruptcy and enforcement tracks, with more than $900 million of customer funds locked up when Genesis collapsed later that year.
The parties involved in the Southern District of New York federal court on Monday, April 25, 2023, declared the resolution in principle. They have asked Judge Edgardo Ramos to stay litigation until later this year while settlement paperwork is finalized. The timeline for customers waiting on repayment through Genesis's bankruptcy estate remains uncertain.
The shift toward settlement suggests that regulatory pressure on Gemini could be easing. This development could potentially allow Gemini to refocus on its core exchange business, as competitors are pushing ahead in a maturing U.S. crypto market.
Notably, the SEC has been softening its posture in some crypto cases, including clearing Gemini of a probe into potential market manipulation. Both Gemini and the SEC have agreed to a 15-business day period for SEC staff and respondents to submit a signed settlement offer.
However, no new comment has been received from Gemini or the SEC regarding the latest filing. The SEC's rules of practice state that if the Commission does not vote to accept the settlement, the stay lapses, and litigation resumes. The final resolution could set precedent for how regulators treat crypto lending and yield products in the U.S., and could also serve as a template for how future products are structured, including whether disclosures and registration are required or whether some models remain off-limits.
The case has become a bellwether for how regulators handle yield-generating crypto products. The final resolution is eagerly awaited by the crypto community and industry stakeholders.
