Bankrupt Crypto Lender Genesis Global Settles SEC Lawsuit in $21M

Bankrupt Crypto Lender Genesis Global Settles SEC Lawsuit in $21M

UTC by Bhushan Akolkar · 2 min read
Bankrupt Crypto Lender Genesis Global Settles SEC Lawsuit in $21M
Photo: Depositphotos

The Settlement Agreement is the product of extensive negotiations between the SEC and Genesis Global. Also, the penalty payment will happen if Genesis completely repays its customers and creditors.

On February 1, bankrupt crypto lender Genesis Global announced that it had settled the lawsuit with the US Securities and Exchange Commission (SEC). As a result, Genesis has agreed to pay a civil penalty of $21 million over the “unregistered offer and sale of securities” via the Gemini Earn Program.

However, this will happen only after Genesis is able to pay all its credits and customers as per the Chapter 11 bankruptcy rules. The filing from the SEC reads:

“The Settlement Agreement is the product of extensive negotiations between the SEC and GGC. The proposed settlement will, among other benefits to the Debtors’ estates, resolve the Civil Action Claim filed by the SEC in these Chapter 11 Cases and eliminate the risks, expenses, and uncertainty associated with protracted litigation against the SEC.”

The proposed settlement aims to conclude an SEC lawsuit filed against Genesis and Gemini in January 2023. The SEC’s case, centering on the period from February 2021 to November 2022, contends that the two companies breached US securities laws through their cryptocurrency lending program.

In response to the legal challenges, Genesis halted platform withdrawals in November 2022 and subsequently filed for bankruptcy in January 2023. The SEC’s lawsuit and Genesis’ bankruptcy proceedings triggered a series of legal actions involving Genesis, Gemini, Digital Currency Group (Genesis’ parent company), and its CEO Barry Silbert. Interestingly, the settlement comes just a few weeks ahead of Genesis seeking approval from the bankruptcy court on its debt repayment plan.

Genesis Pay $8M Penalty to NYDFS

Earlier this month on January 12, Genesis Global also agreed to settle its case with the NYDFS with a penalty payment of $8 million. NYDFS Superintendent Adrienne Harris said:

“Genesis Global Trading’s failure to maintain a functional compliance program demonstrated a disregard for the Department’s regulatory requirements and exposed the company and its customers to potential threats”.

In October, the attorney general of New York initiated legal action against Gemini, Genesis Global Capital, and Digital Currency Group, accusing them of defrauding investors via the Gemini Earn program. The NYDFS clarified in the statement that the settlement pertains to Genesis Global Trading, distinct from Genesis Global Capital.

The recent settlement between the SEC and Genesis is the most latest development in the series of ongoing lawsuits. The SEC is fighting a legal battle with various cryptocurrency firms operating in the United States, including Binance, Ripple, Coinbase, and Kraken.

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