SEC Dismisses Lawsuit Against Winklevoss Gemini Crypto Exchange

The United States Securities and Exchange Commission has agreed to dismiss its 2023 lawsuit against Gemini, the cryptocurrency exchange founded by Cameron and Tyler Winklevoss. The case centered on allegations that Gemini illegally raised billions of dollars by offering an unregistered securities product through its Gemini Earn lending program. Attorneys for both Gemini and the SEC jointly requested the dismissal from a federal judge in New York.

A court filing submitted on Friday outlined the agency’s reasoning for ending the enforcement action. The SEC pointed to Gemini’s prior settlement with the New York State Department of Financial Services and the fact that Earn program participants recovered 100% of their digital assets. The commission described the move as an exercise of its prosecutorial discretion, consistent with its approach in similar cases.

Background and Resolution of Gemini Earn

Gemini Earn allowed customers to lend their cryptocurrency holdings to institutional borrowers in exchange for yield, with Genesis Global Capital serving as the primary counterparty. The program grew rapidly during the 2021 bull market, attracting billions in deposits from retail users seeking passive returns on idle assets. When Genesis halted withdrawals and filed for bankruptcy in January 2023 following the FTX collapse, Earn customers found their assets frozen, sparking widespread concern across the industry.

Gemini responded by committing to pursue recovery on behalf of its users through the Genesis bankruptcy process. The exchange also reached a separate settlement with the New York Department of Financial Services that resolved state-level concerns and included operational commitments. Over the following months, court-approved distributions from the Genesis estate enabled Earn participants to receive their original cryptocurrency holdings in full, without the dollar-value losses experienced in some other crypto bankruptcies.

The full asset recovery marked a significant milestone for affected customers and distinguished the Gemini case from other lending-related enforcement actions. Regulators have increasingly emphasized investor restitution when deciding whether to continue litigation against crypto firms. The SEC’s decision to drop the charges reflects this focus on actual harm and resolution rather than pursuing penalties after funds have been returned.

The dismissal removes a major legal overhang for Gemini at a time when the exchange is working to build trust and expand its offerings. Cameron and Tyler Winklevoss have consistently advocated for clearer regulations while positioning Gemini as a compliance-oriented platform. The resolution allows the company to shift attention toward new products and institutional services without the distraction of ongoing federal litigation.

Crypto lending programs gained immense popularity before the 2022 market downturn but faced intense scrutiny afterward as regulators sought to classify yield-bearing products under securities laws. Several similar platforms either shut down or restructured their offerings to comply with existing rules. The Gemini outcome demonstrates that achieving full customer recovery can influence enforcement priorities and potentially serve as a template for resolving comparable cases.