SEC and Gemini Seek 60-Day Pause in Lawsuit to Explore Settlement Options

On April 1, the United States Securities and Exchange Commission (SEC) and cryptocurrency exchange Gemini jointly filed a request to the federal court in New York, seeking a 60-day suspension of their ongoing lawsuit. In a letter addressed to Judge Edgardo Ramos, both parties requested to halt all case deadlines, stating that the pause would allow them to "explore potential avenues for resolution."

The lawsuit, initiated by the SEC in January 2023, accused Gemini and the now-defunct cryptocurrency lending firm Genesis Global Capital of offering unregistered securities through the Gemini Earn program. The SEC alleged that the program facilitated illegal fundraising from investors, amassing billions of dollars in cryptocurrency assets without proper regulatory oversight.

The Gemini Earn program was launched in 2020 as a feature provided by Gemini, enabling its customers to earn interest on their cryptocurrency holdings. Genesis Global Capital, a subsidiary of Digital Currency Group (DCG), was one of the key partners utilized by Gemini to facilitate the program. Through this partnership, Gemini customers could lend their cryptocurrency to Genesis, which promised to repay the loans with interest. However, Genesis retained full control over how the borrowed crypto assets were utilized. The SEC argued that such offerings should have been registered as securities.

In March 2024, Genesis agreed to pay a $21 million civil penalty to settle its part in the case. Meanwhile, Gemini has been working to resolve its regulatory challenges on multiple fronts.

Earlier this year, in January, Gemini reached a $5 million settlement with the Commodity Futures Trading Commission (CFTC) over allegations dating back to 2017. The CFTC had accused Gemini of making "false and misleading statements" while providing reference data for Bitcoin futures contracts. This settlement helped Gemini avoid a trial that was initially scheduled to begin on January 21.

Additionally, in February, Gemini agreed to return at least $1.1 billion to customers of the Gemini Earn Program through the Genesis bankruptcy proceeding as part of a separate settlement with New York regulators over another legal dispute. These settlements underscore Gemini's ongoing efforts to address its regulatory compliance issues and rebuild trust with its users.

The recent request for a 60-day suspension signals a willingness by both the SEC and Gemini to seek an amicable resolution to their legal battle. If approved, the pause could provide a crucial window for negotiations and potentially pave the way for a settlement that avoids prolonged litigation.