"340,000 investors recover 100% of assets, SEC drops lawsuit against Gemini (GEMI.US), signaling a loosening of cryptocurrency regulation in the US?"

The US Securities and Exchange Commission (SEC) on Friday agreed to withdraw enforcement actions against billionaire twins Tyler Winklevoss and Cameron Winklevoss, the founders of a cryptocurrency exchange, as their lending program investors have fully recovered their assets. The financial regulatory agency decided to close the case last year. The case began in 2021 when Gemini launched its "Earn" program, which the SEC deemed as an unregistered security issuance. Charges were brought in early 2023, signaling a comprehensive crackdown on the cryptocurrency lending industry by regulatory authorities. Specifically, in 2023, the SEC accused Genesis Global Capital and Gemini Trust Company of illegally selling securities to hundreds of thousands of investors through their cryptocurrency lending program. Customers participating in the Gemini Earn program lent their cryptographic assets to Genesis and earned interest from it. When Genesis froze customer accounts in November 2022, the total value of Gemini Earn assets was $9.4 billion. The turning point in the case came in the financial recovery capabilities during the liquidation process and the changing cryptocurrency market environment. Starting in 2024, Gemini, in coordination with the New York Department of Financial Services and bankruptcy courts, achieved a 100% return of physical assets to 340,000 Earn users through the appreciation of Genesis's liquidation assets. According to court documents submitted on Friday, "through the Genesis bankruptcy proceedings and settlement agreements, the cryptocurrency assets of Gemini Earn investors have been fully returned in physical form, and the Commission believes that dismissing the charges against the defendants is appropriate." As investors received full compensation for their losses, the SEC's previous enforcement premise of "protecting injured investors" was significantly weakened at the legal level, and Gemini agreed to pay millions of dollars in fines and permanently cease its lending business. As a result, the regulatory authority ultimately chose to voluntarily withdraw the lawsuit. Unlike other cryptocurrency companies that went bankrupt after the market crash in 2022, Genesis was able to return client cryptocurrency assets intact, instead of liquidating a limited asset pool and paying in cash. During Donald Trump's tenure as US president, the SEC's enforcement approach towards cryptocurrencies changed. Trump promised to be the "cryptocurrency president," introducing more lenient rules and pledging to promote mainstream adoption of digital currencies. With the new government and regulatory bodies leaning towards establishing a more constructive regulatory framework for cryptocurrencies, the previously aggressive mode of "enforcement over regulation" is giving way, providing an opportunity for companies like Gemini and financial technology companies to rebuild market credibility. Gemini successfully went public on Nasdaq last year, signaling that institutional funds are accelerating their entry into the cryptocurrency space, thereby boosting investors' confidence in digital assets. LSEG data shows that the exchange is currently valued at $1.14 billion. While the SEC deliberately downplayed the significance of this move in its statement, emphasizing that it does not represent its position in other cases, the market generally sees it as a substantial signal of relaxation in regulatory pressure. This "tough talk, shift in action" strategy reflects a compromise between political pressure and industry compliance in the 2026 US regulatory landscape.