SEC to Dismiss Crypto Case Against Winklevoss’ Gemini in the "Exercise of its Discretion”

SEC to Dismiss Winklevoss’ Gemini Crypto Lending Lawsuit

The US Securities and Exchange Commission will drop the agency’s 2023 lawsuit against Gemini Trust Co. that accused the firm of illegally raising billions of dollars through an unregistered crypto lending program.

Attorneys for the firm and the SEC asked a federal judge in New York to dismiss the case, according to a filing Friday. The agency said its decision was based on the company reaching a settlement with the New York State Department of Financial Services and customers getting back 100% of their crypto assets. As in other cases, the SEC also said the dismissal was “in the exercise of its discretion.”

An Important SEC Case You’re Probably Not Watching

Five years. Forty document productions. Over a dozen interviews. Then, during a government shutdown, with furloughed staff downloading documents from home, the SEC suddenly discovered an “emergency.”

If you practice securities enforcement defense, you should be watching Koneru v. SEC, Case No. 1:25-cv-04100 (D.D.C.), a complaint seeking a declaratory judgment and injunctive relief. It may prove to be a defining case for how far the Antideficiency Act’s “emergency” exception actually stretches — and whether SEC staff can effectively manufacture crises of their own making.

ICAN Calls for “Enforcement Discretion Excellence Award”

For too long, the incentives within the SEC’s Division of Enforcement have skewed toward opening cases rather than exercising disciplined prosecutorial discretion. As SEC Chairman Paul Atkins recently observed, “if we reward the staff only for bringing enforcement actions… we have discouraged the staff from determining not to recommend an enforcement action. A basic tenet of management is, ‘You get what you measure.’”

Currently, staff who recommend closing investigations risk being viewed as "not aggressive enough." That's backwards. Knowing when not to prosecute often requires more judgment than filing a case. […]

Investor Choice Advocates Network recommends the SEC establish an Enforcement Discretion Excellence Award—to recognize staff who exercise exceptional judgment in closing investigations because further pursuit is unlikely to yield a meritorious result or is not an efficient use of Commission resources.

‘A Wake-Up Call’: Could Letitia James’ Insider Trading Suit Spark a State Trend?

But the fact that James, a state enforcer, brought the insider trading case was alarming for Reed Brodsky, who co-leads Gibson, Dunn & Crutcher’s Litigation Practice Group. James’ suit could spark a trend among her fellow state attorneys general, he said.

“If [the federal government] steps away from certain types of litigation, I think state AGs are more likely to step forward,” he said.

Insider trading cases are traditionally brought by the federal Securities and Exchange Commission and state attorneys general rarely file insider trading cases, according to Joshua Mitts, a professor at Columbia Law School.

He attributed the rarity of state insider trading cases to practical issues. Prosecuting insider trading is labor intensive and states may have decided, as a matter of resource allocation, that that’s better left to the SEC, which has specialized staff and data. There is another practical issue with state enforcement—states either lack the legal regime needed to bring an insider trading case or the jurisdictional hook to do so, Mitts said.

Ex-Coal VP Accused of Bribery Outraged He’s Headed to Trial, Even as DOJ Pulls Back From Other Cases

Yet Hobson’s prosecution, initiated well before the policy shift, continues toward trial, even as other FCPA prosecutions fall by the wayside. For example, in April, a newly appointed U.S. attorney for the District of New Jersey dropped the agency’s long-running bribery prosecution of former Cognizant chief legal officer Steven Schwartz and former Cognizant president Gordon Coburn. […]

Hobson said he plans to argue that Corsa and its executives and board “bought their way out of prosecution in this case via a settlement with the government.” The company disgorged $1.2 million after U.S. and Canadian authorities agreed not to prosecute. Another salesman, Frederick Cushmore Jr., pleaded guilty in November 2021 to conspiracy to violate the FCPA: he is still awaiting sentencing.

Hobson’s defense contends that salesmen were not decision-makers on whether to sell coal in Egypt or pay brokers there. Rather, they only negotiated contract terms, with all proposals requiring authorization from Corsa executives or board members. The salesmen never directly handled money sent to Egypt and had no control over payments except through company funds authorized by the board, the filing states. 

Statement on PCAOB 2026 Budget

The Commission voted today to approve the 2026 budget for the Public Company Accounting Oversight Board (the “PCAOB” or “Board”) and the related accounting support fee. The 2026 PCAOB budget totals $362.1 million, reflecting a 9.4 percent ($37.6 million) decrease from the prior year. I support this budget and recognize its importance as an initial step in refocusing the PCAOB on its core mission. […]

The first concern was the high salaries of the PCAOB Board members, prompting me to reject the budget that year. I highlighted then that “[t]he SEC can and must provide objective oversight with respect to the Board’s salaries. If we do not oversee those, nobody else can.”This budget, I believe, addresses this first concern, reducing the chairman’s and other Board members’ compensation by 52 percent and 42 percent, respectively. This action demonstrates a clear commitment to aligning PCAOB Board pay more closely with the ethos of public service that reinforces trust, demonstrates fiscal responsibility, and affirms the honor of stewardship over the capital markets.

THE SPORKIN PAPERS: LESSONS FROM THE SEC/VESCO AFFAIR

The Sporkin papers reveal that Vesco may have attempted to compromise Sporkin by using intermediaries to offer Sporkin a position working for Vesco if Sporkin could be persuaded to leave the Commission or settle the SEC’s investigation. The Sporkin Family has agreed to make public the memorandum below which was written when Sporkin learned of Vesco's purported efforts. As Sporkin documented in his memorandum, he never engaged in such discussions.

There are two key lessons from the Vesco affair, as described below. One was how G. Bradford Cook, a bright and talented SEC lawyer who served as the SEC’s General Counsel during 1972 and, in 1973, became the youngest SEC Chairman in history, ruined his tenure at the SEC. The other concerns how Sporkin resisted any effort to compromise the SEC’s enforcement process.