Will SEC’s 60-Day Delay Impact Gemini Trust’s $900M Lawsuit Outcome?

The U.S. Securities and Exchange Commission (SEC) has requested a 60-day delay in its ongoing lawsuit against Gemini Trust and Genesis Global Capital. A motion was submitted to the U.S. District Court for the Southern District of New York on April 1, seeking to suspend all deadlines while both parties continue discussions.

Background of the Lawsuit

The suit, which was initially filed by the SEC in January 2023, charges Gemini Trust and Genesis Global Capital with illegally raising billions of dollars using their Gemini Earn program. The SEC alleges that the program was required to be registered as a securities offering but that the companies neglected to do so. The case is part of a wider initiative by the SEC under the Biden administration to strengthen regulations on cryptocurrency companies.

Gemini’s Prior Settlement with New York Regulators

While facing legal pressure from the SEC, Gemini had already reached a separate settlement with New York state regulators. As part of that agreement, the company committed to returning $2.18 billion to customers who were affected by the shutdown of Gemini Earn. This prior settlement aimed to compensate users who had deposited funds into the program before it was halted.

Potential Outcomes of the Delay

The motion does not specify whether the ongoing discussions could result in a settlement, case dismissal, or another form of resolution. However, both the SEC and Gemini Trust argue that pausing the lawsuit serves the public interest by allowing negotiations to proceed while also conserving judicial resources. If the request for the delay is approved, the SEC and Gemini will provide a joint status update within 60 days.

Industry Response to Regulatory Changes

The crypto space has embraced this overall “pivot” in regulatory enforcement; several companies and industry executives had voiced their displeasure with the previous regulatory posture of former SEC Chair Gary Gensler. For example, the Winklevoss twins — the co-founders of Gemini — had been particularly vocal advocates for a more friendly regulatory environment. Their support of the new administration is perhaps most well exemplified in their financial backing of Trump’s 2024 campaign — each donated the maximum amount permitted of $844,600.

Genesis’ Prior Settlement in the Case

Genesis Global Capital, which was responsible for the management of the Gemini Earn program, settled its portion of the case in February 2024 by paying a fine of $21 million to settle charges against it. Genesis had roughly $900 million in assets for approximately 340,000 Gemini Earn clients before halting withdrawals in November 2022.

Looking Ahead

With the SEC’s request for a delay currently before the court, nothing is assured. Any potential timing related to this case – whether it eventually proceeds to settlement, dismissal, or continued litigation – will depend on the negotiations over the next two months. In the meantime, the more substantive change in regulatory policy under the new administration signals a more favorable environment for cryptocurrency companies in the years to come.