PYMNTS MonitorEdge May 2024

Bankruptcy Court Approves Genesis Settlement With NY Attorney General

Cryptocurrency firm Genesis has been banned from operating in New York and will pay a settlement worth $2 billion, the Office of the New York State Attorney General (NYAG) said in a Monday (May 20) press release.

This settlement includes the bankrupt firms Genesis Global Capital, Genesis Asia Pacific and Genesis Global Holdco, according to the release.

“This historic settlement is a major step toward ensuring the victims who invested in Genesis have a semblance of justice,” Attorney General Letitia James said in the release.

Genesis announced in a Friday (May 17) press release that a bankruptcy court had confirmed the company’s amended plan of reorganization and approved the previously announced settlement agreement with the NYAG.

“Our goal throughout this process has been to maximize value for all creditors, and we are gratified that the court approved both our Plan and the NYAG settlement agreement,” Genesis Interim CEO Derar Islim said in the release.

This settlement follows the October 2023 filing of a lawsuit by James alleging that Genesis and other defendants concealed more than $1.1 billion in losses from investors that provided digital assets through the Gemini Earn investment program, according to the NYAG’s Monday press release.

It was reported in October that Gemini Earn aimed to generate up to 8% interest for customers by allowing Genesis to lend their crypto assets to third parties. However, the program suffered significant losses due to the collapse of several high-profile borrowers, including FTX and Babel Finance.

The lawsuit was expanded in February to include charges that Digital Currency Group (DCG), Genesis, DCG CEO Barry Sibert and ex-Genesis CEO Soichiro Moro defrauded other individuals and institutions of an additional $2 billion, according to the release.

Under the settlement, Genesis neither admits nor denies the allegations of the lawsuit, the release said.

The suit will continue against the remaining defendants and Genesis’ former business partner, Gemini Trust, per the release.

“Once again, we see the real-world consequences and detrimental losses that can happen because of a lack of oversight and regulation within the cryptocurrency industry,” James said in the press release. “New York investors deserve the peace of mind that comes from a properly regulated marketplace, and that is something my office will always act to achieve.”