Bankrupt Genesis Settles Fraud Charges in New York

Friday, 09/02/2024 | 06:52 GMT by Arnab Shome

The bankrupt company will return the assets supposed to go to the state regulator to creditors.

It has already surrendered BitLicense under another settlement.

Bankrupt crypto lender Genesis Global Holdco LLC has settled the fraud charges brought against it by the New York Attorney General, Letitia James, through its now-terminated Gemini Earn program. According to the Bloomberg report, the settlement ensured that assets supposed to go to the state regulator would be returned to former Earn customers and other Genesis creditors instead.

Genesis Settles Fraud Charges

The original lawsuit by James last October named Genesis, its parent company Digital Currency Group, and Gemini, accusing them of defrauding $1.1 billion of customer funds. Genesis and Gemini ran the Earn program together but ended up on sour terms and are now engaged in legal fights among themselves.

Under the Earn program, customers received interest against their digital assets, which were loaned to other customers. James' complaint alleged that the Earn program failed to disclose the riskiness of lending to the Earn program. It further accused the three parties of concealing a $1 billion loss following the collapse of crypto hedge fund Three Arrows Capital. However, Genesis, Digital Currency Group, and Gemini denied any wrongdoing.

The latest settlement only resolves the charges against Genesis. However, the bankrupt company settled the charges without admitting to any liability. It also agreed to terminate its business operations in New York state. The settlement deal between Genesis and the top law enforcement official of the state of New York is pending approval by a bankruptcy judge.

A Troubled Company

Earlier, Genesis Global Trading, the sister unit of the crypto lending company, reached a settlement with the New York State Department of Financial Services, paying $8 million in penalties for compliance failures. It further agreed to surrender its BitLicense, mandatory to offer crypto services in New York.

Genesis’ troubles were not limited to the state authorities in New York. According to Axios, the bankrupt company settled a civil lawsuit brought by the Securities and Exchange Commission, which sued Genesis and Gemini for offering unregistered securities under the Earn program.